FO371-24687 — Page 75

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F3460/176/10 OUT FILE

Important

Телечить

نکا

Greno

Horylling! Cypher 79 Сурки 4.3.2EK

Ripeat & Shaughan

706

Copy Treating

JUL 13

X

1940 PM.

II

CYPHER ROOM FOLY

123427

Governor of Hong Kong (Repeated to

Shanghai)

Following for Rogers from Treasury.

Your telegram No. 93.

1.

General objective of our payments agreements is to ensure that sterling receipts of each country will not be sold by it to third countries but will be used by it in the sterling area or held as an investment. If we were to conclude a payments agreement with China, as we have with exchange control countries, it would in our view have to be on the above lines. Thus China is not being worse treated than other countries because we are not negotiating a payments agreement with her.

2. Nevertheless views expressed by you are fully understood and appreciated. We have given earnest consideration to question whether as an exception we could give gold or dollars at the official rate for China's surplus sterling which we take to be what in effect you recommend. But we have regretfully decided that we cannot do so because we need to conserve our dollar resources for our own war effort. The essential purchases which we have to make from North America have now reached very large figures in relation to our resources.

3. It seems to us that the immediatę dollar needs of the Chinese Government must be difficult to predict at present and that any dollars provided by us might assist Japanese. imports from the U.S.A. into controlled China, or a flight from Chinese dollars into U.S. dollars rather than assist essential imports into non-occupied China.

JES13 July 13

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