893.5151/804: Telegram
The Consul General at Shanghai (Lockhart) to the Secretary of State
[Received January 7—5:25 a.m.]
14. Opinion is strongly reiterated among foreign, including American, banks and among vested interests generally at Shanghai that it would be a serious error for the Chungking authorities to yield to the section of political thinking which favors scuttling Shanghai as of no further value to Chinese financial strategy, such as would be the case if all support were removed from the national yuan in the Shanghai foreign exchange market. Having expended so much effort thus far in maintaining the prestige of the Chinese currency at Shanghai, it is contended that any such action would nullify much of the advantages of past effort besides virtually forcing all interests here into an abandonment of face with regard to resistance against the encroachments of the Nanking régime.90 An American banker expresses the view that stabilization funds are not likely to be drawn upon in the near future except to support an excess of imports, and expressed the opinion that a fund of United States dollars 50,000,000 under present conditions should last at least for a year and a half for that purpose, and that once speculators realize there is a powerful control they will not be likely to attempt raids.
He also expressed the view that the heavy drain on exchange reserves in the past was due to support being maintained at too high a rate (which may have been done deliberately at one stage to permit certain interests to get their capital out), but that these past errors need not be repeated. He states with emphasis that the fapi still [Page 595] enjoys an enormous prestige. Furthermore, it is reiterated that Shanghai continues as the financial center of China, despite its beleaguered position in some respects, and it is predicted that disaster to the Chinese national currency here will be sharply reflected in the Chinese controlled areas, hence no abandonment of the position here should be considered except in extremity, particularly as the concentration of capital investment at Shanghai in industrial plant and otherwise must serve as a source for rehabilitation after the war. Its abandonment would further Japanese aims to destroy American interests and loyal Chinese position here and could be of no advantage to either Chinese aims or to the American position. Another American banker expresses the view that the American fund following [designated?] for stabilization should be employed to keep trade open and functioning and in later stages, if it becomes necessary, to institute a licensing or allotment system for specific necessary imports at a pegged or official rate and to allow a black market to exist at levels under those rates. It is suggested that both Treasury and Commerce be informed of the foregoing.
Sent to the Department. Repeated to Peiping, Chungking. By air to Tokyo.
- Japanese-sponsored “government” under Wang Ching-wei.↩