FO371-24687 — Page 84

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2.

corresponded to $55,000,000 (obviously the rate of con-

version used is 1/2d at the present market rate this

foreign exchange would amount to over $200,000,000). It

is quite impossible to believe that the Bank can have

acquired anything but a very small percentage of this

sum through their Exchange Control measures.

3

The Governor was further reported to have

stated that in order to prevent the upward tendency of

commodity prices in North China the Federal Reserve

Bank authorities would make every effort to check harm-

ful inflation; the issue of notes which exceeded

$510,000,000 early in February had been reduced to about

$500,000,000.

4.

On the same day, March 30, the Japanese controll-

ed Chinese newspaper "Chen Pao" printed the following

statement:-

"After a careful study of the situation arising

from the enforcement of the inflatory policy of the

Federal Reserve Bank which for a time forced a sharp rise

in the commodity prices, the local Liaison Office of the

China Affairs Board has discovered that the big circula-

tion of the notes issued by the Federal Reserve Bank is

for reconstruction purposes and development of industrial

enterprises. Besides, a huge amount of money is being

drawn from the Bank including money spent by Japanese

residents and tourists as well as money remitted by

Chinese labourers from Manchoukuo and Mengchiang.

balance the international payment, the Peking Administration

То

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