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134-3
-3 -
to China large amounts of foreign exchange, trans-
portation difficulties prevent China from using it on
a large scale for imports. Converting such exchange
into local currency for domestic use results in
further inorease in the amount of ourrency in circu-
lation thus aggravating inflation. The foreign
exchange value of the Chinese National dollar is
pegged but there exists an active black market at
which its value in terme of United States dollars is
much below the official rate.
4. Inasmuch as the Chinese Government cannot
obtain additional tax revenue with which to pay for
any goods or services that it might supply our troops,
it would appear that any reverse lend-lease by that
country would necessitate increasing further the amount
of currency in circulation. As pointed out above, hov-
ever, the amount involved would be small and, moreover,
the immediate effect upon the financial situation in
China of current purchases by our armed forces of
supplies and services in that country is not very
different. In order to pay for such goods and services,
our forces must exchange United States money for local
currency which the Chinese Government can supply only
by printing it.
5. The question was raised as to whether China
might be asked to furnish raw materials for American
war industries as reciprocal aid. While it may be
well to keep in mind the possibility of asking China
to do so at some future date, when supply routes are
reopened, it would not appear reasonable to make such
a
request now. A substantial part of China' exports
to the United States are used to pay off loans by the
Reconstruction Finance Corporation. During the four
months, June to September, United States general im-
ports from China averaged only $386,000, equivalent to
a
yearly rate of $4,632,000, whereas payments due the
Reconstruction Finance Corporation on account of
principal and interest on its loans in the year 1943
total $14,165,204.82
Recommendation. It is suggested that no action
be initiated in regard to a reciprocal aid agreement
with
ARCHIVES "NATIONAL AND
to RECORDS SERVICE' to
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"ocrText": "253\n134-3\n-3 -\nto China large amounts of foreign exchange, trans-\nportation difficulties prevent China from using it on\na large scale for imports. Converting such exchange\ninto local currency for domestic use results in\nfurther inorease in the amount of ourrency in circu-\nlation thus aggravating inflation. The foreign\nexchange value of the Chinese National dollar is\npegged but there exists an active black market at\nwhich its value in terme of United States dollars is\nmuch below the official rate.\n4. Inasmuch as the Chinese Government cannot\nobtain additional tax revenue with which to pay for\nany goods or services that it might supply our troops,\nit would appear that any reverse lend-lease by that\ncountry would necessitate increasing further the amount\nof currency in circulation. As pointed out above, hov-\never, the amount involved would be small and, moreover,\nthe immediate effect upon the financial situation in\nChina of current purchases by our armed forces of\nsupplies and services in that country is not very\ndifferent. In order to pay for such goods and services,\nour forces must exchange United States money for local\ncurrency which the Chinese Government can supply only\nby printing it.\n5. The question was raised as to whether China\nmight be asked to furnish raw materials for American\nwar industries as reciprocal aid. While it may be\nwell to keep in mind the possibility of asking China\nto do so at some future date, when supply routes are\nreopened, it would not appear reasonable to make such\na\nrequest now. A substantial part of China' exports\nto the United States are used to pay off loans by the\nReconstruction Finance Corporation. During the four\nmonths, June to September, United States general im-\nports from China averaged only $386,000, equivalent to\na\nyearly rate of $4,632,000, whereas payments due the\nReconstruction Finance Corporation on account of\nprincipal and interest on its loans in the year 1943\ntotal $14,165,204.82\nRecommendation. It is suggested that no action\nbe initiated in regard to a reciprocal aid agreement\nwith\nARCHIVES \"NATIONAL AND\nto RECORDS SERVICE' to"
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