FO371-23515 — Page 287

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X.

STATE FINANCE.

32.

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80.

Preliminary estimates for the 1939 budget show an

increase in ordinary revenue from 264 to 296 million yuan and

in borrowing from 374 to 450 million yuan. The disproportion

between actual revenue and borrowing is striking. It is pre-

sumably due to the demands of the five year plan but until

there has been time to study the budget in detail, it is better

to reserve comment. one thing can be confidently stated. The

economic chains binding Manchoukuo to Japan are now so close

that the finances of the former must stand or fall with those

of the latter. By itself Manchoukuo's budgeting is startling.

But if Japan is able to finance her until such time as a return

may be expected on the present enormous outlay, then her methods

of finance need not of themselves be considered unsound.

81.

Towards the end of the year a serious shortage of for

eign exchange has become apparent and permits to remit have been

practically unobtainable. There is no reason to suppose that in

this matter there is any unfair discrimination against the fore-

ign merchant, the truth being that the exchange is at the moment

simply not available. The Manchurian dollar is still linked to

the yen at the artificial value of 1/2d., which handicaps Man-

choukuo exports in competition with exports from Tientsin fin-

anced on the chinese dollar valued at approximately 8d. The

fact that the two dollars exchange in Tien sin almost at par has

naturally tempted speculators, and a number of cases of attempt-

ed evasion of the exchange control laws have been reported.

most conspicuous and recent case is that of a number of Jews in

Harbin who are standing trial on the charge of making large sums

by persuading others to apply for permits to remit exchange to

non-existent relatives abroad, and then to sell the exchange to

members of the ring at a price giving both a good profit.

Recent legislation has made swindles of this kind more difficult,

The

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