893.515/329: Telegram
The Consul General at Shanghai (Cunningham) to the Secretary of State
[Received October 15—9:20 a.m.]
489. Referring to telegram 482, October 12, 11 a.m.,31 following published by Kuomin News Agency dated Nanking, October 14th: [Page 451]
“The Government today issued the following order:
‘In view of the undue rise of silver out of relation to the level of general commodity prices, the National Government, in order to safeguard China’s economic interests and to protect its currency, has fixed the customs duty on exports of silver, effective October 15, as follows:
On silver dollars and mint bars, 10 percent less 2¹⁄₄ percent minting charges paid, i. e. 7¾ percent net.
On other forms of silver, 10 percent (in lieu of 2¼ percent).
In addition, an equalization charge will be imposed on exports of silver equal to the deficiency, if any, existing between the theoretical parity of London silver and a rate of exchange officially fixed by the Central Bank of China, after making allowance for the export duty.’
In commenting upon the order, His Excellency Dr. H. H. Kung, Minister of Finance, stated that there is no reason to expect that the forces that have been stimulating the price of silver abroad will soon cease to operate. Therefore the Government, out of regard for the economic welfare of the people who live in China, had taken this measure as a necessary step to safeguard China currency from a potentially dangerous drain of the country’s monetary reserves, and to place a check upon the operation of the harsh deflationary forces which have been reflected in falling internal prices.
The measure has been determined upon, said Dr. Kung, after most careful consideration of various proposals for meeting the emergency, and after full consultation with leaders of business and finance. Among these proposals, an embargo has most frequently been suggested. The Government considered, however, that an embargo should not be imposed, and preferred a flexible duty that will restrain exports of silver within the limits actually required by the balance of payments. Dr. Kung expressed assurance that the measure would allay the misgivings that have lately disturbed the markets and by stabilizing the situation would permit legitimate business to proceed with renewed confidence.
Dr. Kung when asked concerning rumors about the possibility of reduction of the silver content of the dollar, stated that this subject had never been mentioned at any of the conferences and that he would not even consider such a proposal if made.”
Have confirmed accuracy of Government order from Central Bank of China. Following notice published by Central Bank of China, October 14th.
“Notice is hereby given that the Central Bank of China will notify to the Customs at 11:30 a.m., on every business day, beginning October 15th, 1934, its official rate for determining the deficiency between the theoretical parity of London silver and the rate on London in Shanghai, in accordance with the terms of the Government order fixing the duty and imposing an equalization chargé on exports of silver.”
Repeated to Legation.
- Not printed.↩