CHINA’S TROUBLES

Dominion, Volume 29, Issue 229, 24 June 1936, Page 9

CHINA’S TROUBLES

Result of Sir F. Leith Ross’s Survey

CURRENCY POSITION Remarkable Progress Mad** By Government (British Official Wireless.) (Received June 23, 5.5 p.m.) Rugby, June 22. Sir Frederick Leith-Ross, chief economic adviser to the British Government, who was sent to examine the financial and economic difficulties of China and the possibility of assisting her in conjunction with other Powers, left Shanghai for home to-day. He gave an outline of his impressions in a Press inte-Vew in w’hich he said: “The first question to which my attention was directed was naturally the position of the currency. Silver has for many centuries been the currency of China and the sudden rise in the value of silver during 1934 caused a similar rise in the exchange value of Chinese currency. By October, 1934. the situation had become so serious that the Chinese Government imposed a variable export tax on the export of silver, thereby divorcing the Shanghai dollar from the free silver standard. “But when I reached Shanghai last September it was evident that further positive measures had to be evolved. I was examining the situation with a view to the preparation of a detailed programme with adequate safeguards and, if possible, with international support, but before any such scheme could be devised the exchange market became dangerously weak and the Chinese Government decided to adopt an inconvertible managed currency on the basis of their own resources. I had no responsibility for this bold step but I have no hesitation in saying that the action taken has been fully justified by the success it has achieved. Already much has been done to re-es-tablish sound financial and economic conditions.

Conditions Governing Future. “The prospects of the currency and, indeed, of the whole financial situation of China for the future will depend, first on the maintenance of peace and order in the interior of China, and secondly on a settlement of the special situation in North China. In particular Customs revenues are a vital factor in Chinese finance and every effort should be made to put an end to the difficulties in the way of their collection. These difficulties cannot be removed without a better political understanding between China and Japan. “During my last visit to Japan I was assured that the Japanese Government desires such an understanding, that It favours the maintenance of the Chinese Customs administration and will give no support to the creation of a special tariff by any local authority in China and that it has no wish to interfere with the internal administration of China.

“Currency reform has laid the foundation for an increase of trade activities. Exports are expanding and the adverse balance of trade has been greatly reduced. But export trade could be still further stimulated if the burden of local taxes, inter-port duties and export duties could be reduced and if the standards of production, manufacture and handling could be improved. If present tendencies are maintained there is every reason to expect a gradual and steady improvement in import trade. Imports, of course, are largely affected by the tariff and I hope that the Chinese Government will consider whether the present tariff cannot be revised in a downward direction as far as this is possible without reducing revenue.

“In the past the United Kingdom has done much to develop the railway system of China, but, unfortunately, many of the loan obligations thus Incurred have not been fully met. If a reasonable settlement could be reached in regard to these old debts the way would be open for financing extensions to the present railway system and opening vast stretches of country to foreign trade. No other form of enterprise could be more beneficial.

Value of Middle-Term Credits.

“Apart from railway financing, which calls for long-term credit, the possibilities of arranging middle-term credits deserve exploration. Such credits would be of particular value for financing public utility schemes. I have been impressed by the energy and capacity with which municipal, authorities are developing local projects of this character. There are also many openings for the investment of private capital, in properties or undertakings in China, but if invn-tors are to be attracted confidence must be re-estab-lished by abrogating any measures that have the effect of discriminating against foreign capital and, as regards real estate, by securing that the legal rights of mortgages are fully protected. “Britain’s principal interest in China is to promote peace, prosperity and the trade of China and, in working for this, it seems to me we are working in the interests of all countries trading with China. The reconstruction or China is a vast task which will take years to accomplish and there is room for all to assist her. The present Chinese Government has, despite conditions of peculiar difficulty, made remarkable progress in the restoration o’ law and order, the resettlement of devastated regions and the development of communications. Their recent currency reform was, in my opinion, planned on sound lines and it is in the interests of everyone that it should succeed.”