893.50/11–1248: Telegram
The Consul General at Shanghai (Cabot) to the Secretary of State
[Received, November 12—1:53 a.m.]
2394. In first positive action in economic field since unfreezing of commodity prices on November 1, Government yesterday announced official devaluation of gold yuan to rate 20 to 1 US dollar. At same time possession of foreign currencies and gold and silver made legal and also their use in licensed import transactions. Use in private domestic trading apparently remains illegal. As today Chinese national holiday, there is no immediate reaction on part business circles. Tight money situation has been a most important factor during last several days with interest rates up to 500% per month. This has tended to reduce black market rates for foreign currencies and has depressed a few commodity prices. Many difficulties are anticipated in making mid-month wage payments on Monday. Rice continues more or less unavailable but it is stated that emergency supplies due next week to tide over till larger ECA-sponsored shipments arrive.
Inform Commerce, Treasury, Agriculture and Labor.