FO371-24687 — Page 97

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EXTRACT FROM "FINANCE & COMMERCE"

of 26th June, 1940.

"Japanese Military notes and China's National Currency"

CHINA'S CURRENCY

The

Dealing with the question of China's national currency, Mr. Shimada said: "One has found in the press and elsewhere critical studies of the so-called 'currency manoeuvres' of the Japanese in China. Everyone, of course, realises that in wartime temporary financial measures have to be introduced in order to guarantee the smoothest possible working of the economy of areas under military occupation. The measures inaugurated by Japan's Army, in cooperation with all other Governmental authorities, have been, in my opinion, satisfactory for the population in these areas. North China Federal Reserve Bank-note policy at times, may have open to justified criticism, particularly when the circulation of the bank-notes appeared excessive. The authorities in North China, however, are now pursuing a policy of strict deflation and this, of course, brings some hardships. The Central China monetary position was and is quite different from the North. Here, the Chinese legal tender is freely circulating, and while there are two other currencies in these areas under military control, the fapi has retained its hold. It would be, I think, against the Japanese policy to encroach upon the fapi or to impose another currency upon the people without giving them full security. Shanghai, as the great business centre of China, is dealing chiefly in fapi which is exchangeable against all other currencies. As long as the fapi retains its exchange value, it may be regarded as necessary and indispensable for the economic life of the Chinese.

MILITARY YEN

"The introduction of the Military Yen in the areas of Central China under control of the Japanese Army, is a temporary measure only. The issue of military Yen notes at one time reached a comparatively substantial total, but this has since been considerably reduced. It must be borne in mind, also, that the military Yen are endorsed by the Japanese Government and people in the same way as the Bank of Japan notes. That the local market values the Military Yen note about 25% higher than the fapi is a clear sign that everybody realises that behind the military Yen stands Japan, as she stands behind her home currency. The stringent measures to curb the military Yen note issue and Japanese trade progress in Central China will tend to improve the quotation of the military Yen. That the military Yen has been separated from the Yen in Japan is solely a matter concerned with Japanese domestic financial policy, facilitat- ing the control of the currency.

"The Hua H sing Dollar, the third currency in Central China, is only of importance for financing Central China trade and as recognised tender for payment of Customs dues. The Hua Hsing Commercial Bank is a commercial institution in which the Chinese Government in Nanking has a large capital interest, but it does not aspire to extend the scope of its banking activities beyond the above stated purposes, as far as the note issue is concerned. It never has been contemplat- ed to repeat here the measures introduced in North China, under quite different economic and political conditions, in connexion with the F.R.B.-note. Whilst the F.R.B.-note was a pre-requisite to the economic reconstruction of the North, the retainment of fapi in other parts of China, supported where need by by the Yen, was a practicable solution of economic problems!

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