FO371-24687 — Page 206

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F

F 3726

128

DEC

1940

DEPARTMENTAL No. 2:

Decypher.

Mr. Broadmead (Shanghai).

18th December, 1940.

D.

5.45 p.m.

21st December, 1940.

R.

12.55 p.m.

22nd December, 1940.

No. 1103.

XXXXXXXA

7 1, ༼་བ ། 4 ད ི ༽ ི

Under a regulation issued on July 24th at Singapore by the controller of foreign exchange based on instructions from London, remittances to Shanghai offices of rubber companies in Malaya are limited to an amount comparable to the sums remitted during the past three financial years. Owing to a policy of paying dividends since early 1938 from proceeds of local investments in Shanghai, profits remitted have been much less than the declared profits. These local invest- ments are now exhausted and companies are unable to pay dividends [grp. undec.] they have therefore urged that remittances be permitted as heretofore on the basis of 80% of declared profits.

2. Of 25 companies concerned 9 in 1937 sold local invest- ments amounting to Chinese dollars 90.307 (Straits dollars 46,385): 5 in 1938 amounting to Chinese dollars 111,691 (Straits dollars 44,818); and 20 in 1939 amounting to Chinese dollars 736,640 (Straits dollars 142,081).

3. Owing principally to rumours that remittances are to be drastically restricted, the capital value of these shares in this market in 1940 has diminished from 110,898,815 dollars to 61,670,639 dollars. Since they are widely held as collateral security this has adversely affected financing of local trade. Moreover these shares have always been unsuited to an investment of a sterling nature with the result that the market value has always increased as Chinese dollars depreciated. New ruling has therefore not only caused widespread hardship but has also been prejudicial to British prestige among the general public and more especially since it is understood that the authorities in Netherlands East Indies are permitting remittances on the basis of net profits in 1940. Hong Kong and Shanghai Bank and The Chartered Bank of India, Australia and China strongly endorse these views, Mercantile Bank is in general agreement but inclines to the view that the local effects may be neglected [2 grps. undéc. ] but your ruling Chinese [grp. undec. Jing November final dividends due by the three companies amounting to local dollars 1,072,400 companies will have to explain why full dividends cannot be paid though ample profits have been earned and repercussions here are likely to be out of all proportion to the sum in Straits currency which is involved since the total difference for all companies for the years 1937-1939 between average profits and average remittance has been only Straits dollars 421,592.

28

DEC

1940

F.O. REGISTRY.

5./

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