FO371-24687 — Page 68

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And

Cop Que

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INDEXED

ద

5 Walls

F 3460

176/

10

K

12 JUL 1940

E

21

Decypher.

Governor

LIITED DISTRIBUTION

(Hong Kong)

10th July, 1940.

This is answered

11th July, 1940. by Co tel to 71lly

D.

3.46 p.m.

11th July, 1940.

R.

11.40 a.m.

No. 93

& & & & & & & & & & & &

LEEDIATE.

MOST SECRET.

Your telegram No. 353.

notiaca

Thaitigen 799/13/7.

:-("F)

co ante las raw of cliquez

Following for you and Treasury from Rogers.

وادر ليبية

It is difficult to give accurate figures of balance of payments of China with the Empire but there is reason to believe annual emigrant remittances are of the order of fifteen million pounds. I presume trade balance during the past twelve months approximately ten million pounds.

I confess that

I do not as yet see how China will find buyers of five million pounds outside of controlled areas especially as Hong Kong will also be a competitor for United States dollars.

2. Even if, as I expect, the Chinese dollar appreciates against sterling and depreciates against United States dollar I am not hopeful about China's balance of payments to make the adjustment called for or that trade with the United States will be limited to the United States dollar income, except at cost of serious economic disturbance. [?With] obstinate scarcity of freight and pre-occupation by the Empire with the war effort the appreciation of Chinese dollar against sterling seems unlikely to promote imports from the Empire in required volume. Depreciation against United States dollar on the other hand would probably not substantially reduce imports the bulk of which are [?I understand] in demand but would initiate increase in prices, which it is our constant concern to avoid in view of the present incipient inflationary tendencies in China.

3. Sterling purchases by the fund are to be expected but my concern is less with the [?rectification] of the position of the fund than with its ability to discharge its primary purpose and with the maintenance of the currency stability at the present most important stage of the 'burrency war" in China. Pand would have little meaning if it were to become choked

with/

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