F.
The Governor, (Hongkong).
15
LIMITED DISTRIBUTION.
21st June, 1940.
D.
R.
5.38 p.m. 12.30 p.m.
21st June, 1940.
21st June, 1940.
No. 77.
0:0:0:0:0
شركت
SECRET.
attached
Your telegram No. 287 siol
Following for Treasury from Rogers.
¡F_5460,
23 Jul
1. Sterling received by China and Hongkong from trade and services rendered to the Empire has to be sold for foreign currencies. New procedure suggests that in so far as these sales of sterling are against American dollars sterling will be bought by control at official rate. I read paragraph 3 of telegram under reference to mean that transactions in sterling at free rates will be virtually eliminated and not free sterling. I assume that non resident sterling balances will continue to be free.
2. I offer following comments with regard to China.
(a) Obstacles to a payments agreement seem insuperable. (b) Tenour of sterling market in New York at official rate will remove [? mutual] speculation on cross rate and thereby introduce greater stability to our market.
(c) In spite of changes brought about by European war Chinese dollar is still moving very largely with sterling. Appreciation of sterling in New York will adversely affect balance of payments in the present circumstances. Increased imports may be expected. Fund will probably allow a further downward adjustment of currency.
3. New regulations are imperfectly understood in Shanghai. Speculators are confused and not inclined to take much [gp. undec.] position one way or the other. Recent tendency to work below cross rate reflects misgivings about European war.
4. I should be glad to know
(a) Whether adjustment of cross rate may be expected in the near future;
(b) Extent to which leakage referred to in paragraph 4 of your telegram under reference is [? in regard to] Shanghai
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