FO371-24687 — Page 230

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COPY

SUBSTANCE OF A

TELEGRAM FROM DR. H.H. KUNG

ON PROPOSED CHINESE EXCHANGE CONTROL

150

To be effective the proposed Exchange Control calls

for effort in three different directions:

A. ON PART OF THE CHINESE GOVERNMENT

1). To enforce strict rules of examination and of control.

All legitimate and necessary requirements for foreign exchange when applied for will be granted with as simple a procedure as possible. Special care will be taken to prevent the enemy and the puppet regime from getting foreign exchange indirectly as well as to prevent speculation so as to strengthen public confidence in the Chinese currency.

2). Strict economy has already been achieved in all budgetry expenditure of the Chinese National Treasury. Efforts are now being made to restrict note issue, to accelerate the accumulation of gold and silver and further to strengthen our cash and securities reserve.

B. ON PART OF THE CHINESE BANKS

The Chinese Banks will make every effort to increase their holdings of foreign exchange, to absorb remittances from overseas Chinese and to fix the current rate of exchange on a firm basis in order to insure long term stability, which will be of benefit to Sino-British and Sino-American trade. At the same time, effort will be made to encourage savings, to absorb idle money and to restrict credit.

C.ON PART OF THE FOREIGN BANKS

A serious effort will be made to secure the co- operation of foreign banks in obtaining their consent to stop forward and change-over transactions in foreign exchange so as further to strengthen the market.

The above policy of control, involving elements both temporary and fundamental, should find sympathy with the British Government.

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