BANKING/CREDIT/CURRENCY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00047R000400100001-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 2
• Document Creation Date: December 15, 2016
• Document Release Date: September 16, 2002
• Sequence Number: 1
• Publication Date: February 8, 1954
• Content Type: REPORT

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Approved For R~'f~Isezd03h~HG IIE K-I ~NrSZ-00047R4
INFORMATION REPORT
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COUNTRY China/Hong Kong/Macao
SUBJECT Banking/Credit/Currency
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PLACE
ACQUIRED
.DATE
ACQUIRE'
Toll NOCUHENT CONTAINS IN9OSNATIOY Ar[[CTINO THE NATIONAL SEVENS!
OT TSE.OSITEN STATES, WITHIN THE NEANINC OV TITEE IS, SECTIONS 793
ASS 794. OV THE U.S. COO.. AS AMENDS!. ITS TNANSYISS IOY O? ?ET!.
EATIO! O! ITS CONTESTS TO ON ^ECEITT ST A. ONAOTSEOIIEO TENON! IS
TSOH I.I TEO ?T LAS. THE ^ETNOO9CTION OF THIS TOO! IS SNOSINITEO.
DATE DISTR. Feb 54
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NO. OF ENCLS.
(LISTED BELOW)
SUPPLEMENT TO
REPORT NO.
THIS IS UNEVALUATED INFORMATION
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Banking and Credit
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1.
Industrial credit was easy to obtain, to prevent unemployment and to tighten
government control over production.
2. Foreign exchange was under very strict control. The People's Government wanted
and needed US and Sterling currencies. It encouraged the people to de-mlvd
their foreign currencies or to exchange them. at the bank. The circulation or
transactions of foreign currencies and exchange on the market was strict:!y
prohibited. The People's Government procured foreign currency and exch-u ge in
several ways:
A. By export and import control.
B. By confiscation during the 5 anti and 3 anti periods of earlier times.
C. By compulsory purchasing of victory bonds.
D. By compulsory *voluntary" conti.ibutions.
E. Small quantities were absorbed from savings.
3.
ORR Ev
A few private industries or commercial houses were also encouraged and initiated,
therefore allowing a small amount of foreign exchange to enter.
The People's Bank of China is the central bank. It is the government monetary
agency -vhich creates money. It issues paper money, a kind of managed money which
is not convertible to either gold or foreign exchange. The People's Bank lends
out, not what the people deposit, but the special money that it has created.
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most deposits and loans are made through other :overnment
banks. Such as, the Bank of Communications (for individual loans), the Pa is
Bank (for agricultural loans) etc. These banks, when they do not have sufficient
deposits to negotiate loans, may then borrow money from the People's Bank which
controls all operations of all other banks either private or governmental.
The Post Office, a tool of the government, also acts as a savings institution. In
this roll it absorbs a large number of small savings, the use of which is designated
by the government.
111 metal monies had been withdrawn from circulation by 1950. The only mono-y in
circulation at that time was paper money. How much currency is in circulation at
the present is impossible to determine because the banks have been under central
control for too short of a period.
6. The government was forced to cause inflation in order to meet deficits in budgete.
7.
mainly in Hong Kong and Macao. I do not know exactly how the balance of paN. ve>i ; *MR
made between the People's' Government of China and Czechoslovakia. However, one- can
arrive at a fairly accurate decision by recalling the balance of pay t ,, .t ,-? ;he T$SR.
Under the treaty of February 1950 between Red China and the UM, the tr -A., ; : zpl-fated
that a credit of TS $300,000,000 be established and the balance of pa;rt$ it ..;: to
be made by sending commodities from China which were wanted and needed by the TEM.
e.g. soya beans, tea, and minerals. Under this barter system, the stlpulatel IS
currency was only an accounting unit used for the evaluation of price--; of comes d:ities
at world market prices.
Prices increased slowly, but as a result very high. (The government possessed huge
quantities of commodities of the first necessity, such as food, clothing and nedl%jIne).
Later, every method possible was initiated, such as, issuance of bonds, compulsc
contributions, confiscations, and heavy taxation.
Foreign financial resources and operations are as follows: There are branches of
government banks in the UK (the Bank of China in London); in India (the Bank of China,
and the Bank of Communications in Calcutta); in Burma (the Bank of China in Ra::igoon);
in Hong Kong (the Bank of China, the Bank of Communications, and the Fa mmer's Bank);
in Singapore (the Bank of China); and in Macao (the Bank of China). 3alan~.'? of payments
in these countries were paid by foreign exchange. At certain times the gcvvr-maent
sold gold through its agents in order to procure foreign exchange. T"xis waF done
There existed a very small amount of UK currency or exchange on the Chl-aa Mainland in
1950. The Chinese people held only Tl6 money and exchange notes, and Hong. K0-1g d h'_ l rs.
The official rate of exchange in Shanghai in October 1949 was 4500 Yuan tt:- US ' .0 .
In January 1951 20, 610 Yuan to TS $1.00, and in December 1952 23,430 Yuaac:" to TV $1.00.
9. Since everyone spied on everyone, an effective black market in monies was impossible
in China. However, in Hong Kong and in Macao, there was a free market, where IS money
brought 10 to 20% premium.
10. Inked China the official rate of foreign exchange was actually the bsrk': bR-i-.g rate.
People could not buy foreign exchange or currency from any bank without spec u:.l
permission from the Government. They could only sell their foreign exc?aar.,ge %x currency
to the government designated banks which in turn forwarded the accumulated. fore
exchange and currency to the People's Bank.
11. The bulk of Red Chinese transactions with non Soviet bloc states are conduct-,c? y
agents in Hong Kong. Two government banks, the Bank of China and the Bank of Communi-
cations, handle the banking business of the two million population of whic-t: =a=?- than
90% are Chinese. In fact Hong Kong's business circles were largely influences', by these
two banks. Macao, although a small Portuguese colony, is mainly Chinese andi.ts
importance to Red China is mainly as a port of transit and smuggling. Most of the gold
and drugs smuggled into China are by way of Macao.
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