CURRENCY AND WAR IN CHINA.

Wairarapa Times-Age, 10 August 1939, Page 6

CURRENCY AND WAR IN CHINA.

JT is one of the peculiarities of the extraordinary situation in China that the currency of that invaded, robbed’and harried country has thus far in a. remarkable degree maintained its standing and value as a means of.acquiring foreign exchange. With her coastal areas and much other territory in the hands of the .Japanese, China has lost all but a small part of lhe Customs revenue which normally is the mainstay of her national finance, and her taxation from other sources, notably the salt tax, has also been heavily reduced. There have been inevitable defaults on foreign and domestic loans, but in spile of everything, China has in a measure maintained the value of her currency. General Chiang Kai-shek look’ occasion to declare very recently that the Chinese Government “will certainly maintain the value of the national currency and supply foreign exchange for the purpose of legitimate transactions and take appropriate measures to meet the situation.’’ One Hie same occasion, however, the Chinese Generalissimo said that he had never been in favour of the indiscriminate supply of foreign exchange to those doing business in the foreign concessions in China, “tor this exposes our war time currency to the injurious manoeuvres of an enemy and of unprincipled speculators.’’ The point is here emphasised that the maintenance by China of a currency which will enable her to pay for imports into her unoccupied territory does not of necessity imply the maintenance of lhe value of the Chinese dollar in the foreign concessions. A message from Shanghai published yesterday reported that the Chinese dollar had slumped to a new low level and that the market, closed on Monday with the dollar below 4d. During the war period the dollar has been allowed gradually to decline from an exchange value of Is 2od and at a recent date it stood at 6!d. A further fall to 4d or less may suggest that the Chinese dollar must be rated as a very low-grade currency. Never! lieless it compares very favourably with the Japanese yen and other units of currency now circulating in China. A writer in the “Christian Science Monitor” observed on this subject recently that:— Whereas the yen and the various other types of paper money that have been introduced by the Japanese fiscal authorities in North and Central China are inconvertible, lhe Chinese national dollar, which is backed by a £ 10,000,000 Anglo-Chinese stabilisation fund, can still be exchanged for foreign means of - payment. Therefore the Japanese are acquiring such Chinese currency as can be found in the occupied regions through taxation, special military levies, sale of Japanese goods, and other means, and are promptly exchanging it on the free money markets of Shanghai, Tsingtao. and, until recently, Tientsin. The Chinese Government could, by refusing to maintain the free convertibility of the Chinese dollar, stop at once this indirect aid to the enemy, and the Chinese economy could probably weather the after effects of such a step; but to all foreign interests in China it would mean a disastrous, if not fatal blow. With 11m Chinese dollar withdrawn, only inconvertible currencies would circulate in the foreign concessions and any trade remaining would lie controlled completely by Japan lor her own purposes. When he was questioned in the House of (’ominous recently on Hie subject of the Chinese dollar, the British Chancellor of Hie Exchequer. Sir John Simon, staled that there had been no change in British policy and declined to give any information in detail about the operation of the stabilisation Hind. It is obvious, however, that if the Chinese dollar were allowed to collapse, an immediate effect would lie to destroy, lor the time at least, the value of all foreign trading concessions in China. No substitute for the Chinese dollar as a unit convertible into foreign exchange is in sight or is likely to be provided.

Japan is approaching the whole question wilh an eye solely to her own wal'-emphasised necessities.. Iwo tears ago. Japan’s export trade brought in al! the foreign exchange she needed, hut official and unofficial boycotts of Japanese goods in various countries have reduced corresponding!) the Hinds secured bv selling. -Most foreign countries, too, have refused to grant Hade credits to Japan. In her present demands that Britain should abandon her support of the Chinese currency and should surrender lhe (’hinese-owned silver bullion held by hanks in the British (’oncession at Tientsin, Japan is seeking Io satisfy, by methods of banditry, needs that are tending Io become desperati —particularly the need for foreign exchange, or its equivalent, with which to pay lor essential war impoits.

11l Illis mailer, ;is in oilier details of lier campaign in Uliiiia, .liipnn appears to lie pursuing a course ol blind fury. II she succeeds in destroying the exchange value of the Chinese dollar, she will undermine all foreign trading interests in China and perhaps may regard Unit as a desirable achievement. There is no visible assurance, however, that she will in this way either bring China to her knees or lighten her own increasingly formidable trading' and economic difficulties.