893.5151/9–1748: Telegram
The Consul General at Shanghai (Cabot) to the Secretary of State
[Received September 17—8:20 a.m.]
2049. For State, Treasury, and ECA from Casaday and Parker; [repeated] Canton for Lapham. In interview with Rogers today he repeated general pessimistic outlook as reported ConGentel 1552, July 12, reported general attitude Central Bank and Finance Minister that currency program was going very badly, and that no serious [Page 407] effort was being made by Bank of Chinese Government utilize time gained by temporary stability to initiate and carry through essential economic reforms. In face of mounting pressure deficit financing through increasing note issue, production and commerce coming to standstill. Imports also greatly curtailed primarily as result freezing retail prices. Exports spurted during first week following new rate, but now virtually ceased since domestic prices export commodities at source of supply in interior cities has risen above world market price levels at current exchange rate. Similar price differential exists between Shanghai, other port cities and interior areas so that raw materials and foodstuffs not flowing from interior cities to coast for local production and consumption.
Rogers believes enforcement action cannot contain inflationary pressure longer than possibly one more month. Break, when it comes, will reflect cumulative pressure and go much faster than July–August period. Situation will be aggravated by rice shortage occurring probably within 12 [1–2] months.
Growing sentiment among Chinese Government financial circles for silver coinage, as only alternative to present stringencies. Central Bank now accumulating all silver coins surrendered for gold yuan for possible use as initial release such a program. Possible that high level approach may be made to US Government for assistance silver coinage program during financial meeting Monetary Fund.
Sent Dept 2049; pouched Nanking 1571, Canton 131. [Cassaday and Parker.]