693.002/653: Telegram
The Consul General at Shanghai (Lockhart) to the Secretary of State
[Received 12:25 p.m.]
659. My 649, May 12, 6 p.m. The amount of foreign exchange acquired this year by the Central Bank of China through the sale of customs gold units for payment of customs duties, according to records furnished me by the Central Bank, has been as follows: 13,000 United States dollars and 2,781 pounds all acquired prior to March 18. Of the total about 8,000 United States dollars were obtained at Shanghai and the balance by the Tientsin branch.
The customs are collecting duties at fixed rates based on the official value of the Chinese currency.
Owing to the spread between the official rate and the open market rate existing since the currency decree of March 13, it has been considerably cheaper for importers having foreign exchange to sell it on the open market and pay duties with the resultant local currency. No foreign exchange accrues to the Chinese Government either directly or indirectly as a result of such transactions although they do serve to hold up the open market value of Chinese currency.
The spread between the official rate and the open market rate is now over 20% in Shanghai.
Repeated to Embassy Hankow only.