033.1100 Rogers, James H./95: Telegram
The Consul at Hong Kong (Gourley) to the Secretary of State
[Received August 3—12:45 p.m.]
For Morgenthau from Rogers.22 Silver drain from Shanghai persistent but still not alarming. However in both banking and central banking circles is growing apprehension lest large exports may be precipitated at any time and there is much discussion of possible protective measures.
Meanwhile the drain of silver from the interior continues at a rate about adequate to counterbalance exports so that the reserves of Shanghai banks continue large and approximately constant.
Drought conditions in Yangtze Valley will probably cut rice production in Central China by 50 percent making necessary considerably increased food imports. While wheat crop in North China is good further imports of American wheat under arrangement similar to cotton-wheat loan would probably be welcomed.
Larger imports with no present prospect of increase in exports however indicate more adverse balance of international payments and inducing larger silver exports. Such a situation is not imminent however as increased food imports can be delayed several months.
Nevertheless once the situation becomes apparent there is danger of a financial crisis in Shanghai. As I have already reported many of the banks are heavily interested in real estate loans which cannot be liquidated and once the banks begin calling in such loans (as they would do should silver exports become very large) many bankruptcies will be forced.
Higher silver prices would aggravate this situation. [Rogers.]
- Professor Rogers was returning to the United States by way of Hong Kong and India.↩