893.5151/11–849: Telegram
The Consul General at Shanghai (McConaughy) to the Secretary of State
[Received November 8—3:42 a. m.]
4704. Please pass Treasury, Federal Reserve Board, Commerce. Foreign bankers Shanghai consider vaunted financial stability claimed by Communists at Shanghai more apparent than real, due stagnant condition foreign trade and as new jmp currency unbacked by anything approximating adequate reserves valuta or commodities. Dubious whether immediate hard cash assets Communist banks Shanghai amount to $50 million, if that much, as high maximum estimate foreign currency reserves [available for?] purchases foreign imports, all other uses, aside from amounts currently derived from exports, emigrant remittances used immediately to offset import exchange allotments.
[Page 812]Hopkins, President Shanghai Power Company, reports consensus group important responsible Chinese private bankers, given informally, that Communist revenues Shanghai cover only 30 percent their operating costs.
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Shanghai clearing house handled 2,612,000 checks in October with total turnover jmp 1,572,599, increases of 651,000 checks and jmp 599,418,000 over September. Reopening interior markets long closed by civil war and interruption rail inland transportation expected accelerate demands for Shanghai manufactured goods as reintegration domestic economy progresses. Same time shortages import goods and daily necessities expected exert progressively heavier pressures on prices, including foods as deliveries from rural areas and stocks diminish. Belief widely held Shanghai, Communists can maintain financial stability only so long trade stagnant, but that resumption trade activity will inevitably lead to hyperinflation as under Kmt. If disparity between revenues and operating costs indicated earlier this message correct, would appear hyperinflation inevitable whether trade lags or not.