893.5151/637: Telegram
The Consul General at Shanghai (Gauss) to the Secretary of State
[Received July 18—8:40 a.m.]
615. The exchange control withdrew support this morning and the Chinese dollar has dropped to around 5 pence. On this occasion notice of the proposed action of the exchange control was given in advance to the American banks.
Yesterday the Chinese banks refused to accept Chinese bank notes of the Tientsin issue indicating that support of the Tientsin market has definitely been abandoned.
It remains to be seen whether exchange control will also abandon the Shanghai market or step in later to support the dollar at somewhere around 5 pence or lower.
Bankers tell me that the apparent object is to drop the rate to a [Page 686] point where Chinese funds held abroad will be repatriated. A well informed American observer tells me that he does not believe that such repatriation will be accomplished at a rate of 5 pence.
Repeated to Chungking, Peiping and Tientsin.