ECONOMIC NEWS & DIGEST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00457R007400610007-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 17
• Document Creation Date: December 19, 2016
• Document Release Date: March 10, 2006
• Sequence Number: 7
• Publication Date: February 2, 1951
• Content Type: OPEN

I"i1NIuveu FVl rCCIe a LVVVIvI I . 1~4 RVrv4_VV-4JI I VVI'+VVV 1vv
With Compliments
NO, 19.
of
February 20 1951.
METROPOLITAN COMMERCIAL CO. LTD..
HONG KONG.
le. I+CUiVthvLIC WA1tWAYE & HK
US Plat for - "Economic Sanctions" on China
It wa s learned in Washington that American official advised representa-
tives of the British Commonwealth of nations and other countries on January 30
that the US intended to push ahead for UN approval of "international economic
s anctions" against China.
A uthoritative soti.rces reported that US officials, in a number of luncheon
conversations with representatives of key countries in the UN, expressed the
view that this was the next logical step(to the UN "condemnatory resolution".-
Ed).
They added, however, that American oif'icials had Liven assurances that
they did not intend to ask for diplomatic.aanctions which would involve the
breaking; of relations with Yekinb by countries such as Britain and Inds.; others
who have already recognized the Chinese Government.
One thing appeared to be clear to neutral observers - the US9 havii ; seized
the initiative in the,, matter of "branding Chin, as aggressor", did not intend
to let the matter rest hare. At the smile time, American officials did not in-
tend to push the matter to a point where the majority of other nations would
not follow. Therefore, they appeared ready to a4k "economic sanctions," but
not diplomatic sanctions, in an effort to show some implementation of thu con-
-demn.atory ri.soiu'~ion. (S.C.ui..i:'. 2/12/'51).
Hi Banks 1'urthor liaise the ::ate of iv(ar final posits
The HK mares 'ants are highly sensitive to thQ happenings over in La ke o`uccess
and Washington. In their opinion, the UN "condmnatory resolution'' and the in-
stigations by the US for ''economic sanctions" will affect adversely HK's position
as a transhipment center. The banks have alres.dy turned to be more cautions than
ever in arra nging ma rginal deposits on imports and exports, and have raised the
ra to for the same to more tha is 84 and in some cases, to more than 100%. The
Chinese ba nks refra fined from er4 ,%;ir in hypotheations. (S.T.Y.P. 2/2/'5,0.
US, UK & France's New Commodities Groups
The communique issued after the Washington proposals had been made known to
member count-ries of (Y1 2C la at week merely described the framework of the scheme.
The three sponsoring powers have evidently concluded that a ny formal orga nization
a kin to the combined kuaw t4aterials Board (which operated during; the World War II-
Ed.) would be politically inopportune, difficult to administer, and doubtful of achiev-
ing results. The new scheme is at once more flexible and much less precise, it
will not enforce economic sanctions against any consuming count, nor will it ne-
cessarily spend weeks in delicate negotiations to achieve a unanimous recommendation.
It would seem that the real function of the proposed commodity.roups is to see that
important producers and consumers know a bout the aupplies of and the requirements
for ea ch particular commodit.
?1'he study of methods of expanding production is likely to toil down to long-
term projects and these will have to be co-ordinated with developments already
agreed to under Point IV. Consuming countries may be asked to supply machinery
and equipmentsto facilitate such developments. A more urgent topic is the "in-
"in-
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crea sing exports to friendly countries - one evident way is b reducing ex orts to
non-friendly countries. a in no uniform system seems likely to be imposed on ex-
porti.nj, countries. Each will do whatever it can to expand supplies to the countries
collaboratint; in common defence. Certain countries may find possible to introduce
a system of export licensing and still retain the operation of free markets. Other
countries may prefer other methods.
The vital question of stockpiling; was not mentioned in the communique. Perhaps
stockpile requirements will be included in the defence programmes. Clearly the
possibility of a coordinated stockpile policy must be discussed in one of the various
bodies. At the present time it is not only military necessary for a country to ac-
quire stocks; it is also financially profitable,
No official mention has been ma de of the commodities to considered. The ori-
ginal list included sulphur, copper, zinc, lead, aluminium, cotton, wool and rubber,
But it is known that this week the US has sent out invitations to friendly govern-
ments to establish commodity groups for sulphur, zinc and cotton, in each of which
the US is the predominant producer and consumer, (Economist, 20/l/'51)
The Scope of Japanese Export Control to be Enlarged
As stipulated in the "kuQis&d hegulations for Japanese Export Control" issued
by SCAP on January 1, 1951, the export ban imposed on Dec. 6, 1950, is to be extended
for three months more, and its scope enlarged, i.e., for all Japanese goods destined
for HK and Macao, a special license is required.
The main points of the " hevised heg;ulations" promulgated on Jan, 1 are as fol-
lows: 1) Because of the intensifying; international situation, the special approval
system is extended to covt:r a wider range of commodities of strategical nature, The
examination and issuance of the license as required will be stricter than ever be-
fore. 2) The special licensing; system is to be applied to godwwns as well as ports
of unloading and transhipxmento
meanwhile, the new items added to the list of commodities under export ban are:
Cement, used rubber, industrial leather belt, textile machine, medicines, sewing; ma-
chine and camera ('1'.K.P, 3],11/151)
Japan's Trade with China, the Japan T'rade's Editorial Opinion
Japan's trade with China, which has just recently begun to bud, will suffer ad-
versely, if the heated antagonism such as exists between US and Soviat hussia coun-
tinues. Japan will not be denied a ccess, as a result, to her largest potential. mar-
ket, China, but should political conditions in the South-Eastern Asiatic regions show
deterioration, there is fear that it will become difficult for Japan to import the
goods she requires from these areas. ,Moreover, should the current state of semi-bbelliger?
ency continue for some time, shipping rates will inveitably take an upward turn, and more
countries will gradua lly shift to a quasi-wartime basic. In particular, when the huge US
war budget is unforced, Japan may confront not only a rise in the quotations of materials
required for her export commodities, but a shortage of eriticals as well, It may turn
out that her export trade will suffer contraction as a result, and her economy and the
people's livehood will undergo a n a brupt change.. (J.y. 1)ec. '50)
Suspension of Tra de with China a nd its hYfects on Ja an's hecover Editorial 0 inon
Now that Japan's importation of Chinese materials has been made impossible, Ja-
panese heavy industry, especially her iron steel ma nufacturing, is threatened with
a serious blow in the way of industrial production.
Japan finds it urgent to ensure adequate supply of coking coal and soyabeans from
other sources in order to surmount this unexpected obsta oleo It is only natural that
the Japanese government has requested SCAP for American supply of these two key materials.
It is to noted in this connection that Japan's imports from America cost higher than
those from China, As for the price of coal, the higher import price will result in highs
steel cost, with unfavourable effects involved or) Japan's industries. Next, how to fin-
ance imports. Japan could settle her imports account with China with export of her pro-
ducts, whereas she must pay dollars for her imports from America,, bringing; with it a big
drain on Japan's international balance of payments.
foreign despatches point to a possibility of increased US aids to Japan under the
)reva ilia; world situation, Japan is sincerely hoping for some ways and means opened
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to her by which to obtain more foreign currencies and increased exports instead of an
increa sed inerica assistance. Some of her major desires are: 1) The most-favoured
nation clause is given to Japan by world nations. 2) Amelioration of SCAN regulations
restricting; dollar cash payment for Japan's .imports. 3) A wider scope of activity of
the Japanese merchant fleet so that Japanese merchant marine can carry import cargoes.
This will save Japan much of her foreign currency payments for freightage. (J.E.I.
Dec. '50)
Japanese E sort of Steel Material Dwindling
Japan's exports of steel material which had been on the increase since last April
has shown a sharp decline, due to the recently intensified control on export to China,
with 54,000 tons in September, 39,000 tons in October, with 72,000 tons in August as the
peak,
Steel export contracts stood at 21,929 tons in April, 43,336 tons in July, 72,224 to
in August. The figure dropped to 54,555 tons in September, and the October export fell
to 39,413 tons or the half of A%us?t amount.
Formerly the export of steel material to China registered about 40% of the total ex-
port. The prices of Japanese makes were sold at 497 for 19mm. steel bar, 4380 for gal-
vanised sheet iron (140. 26), as compared with v87 for Phillippino steel bars, X82 for
Austra lion, and .88 for Thai products. Under such favourable conditions, coupled with
the fact that domestic types are available for export, Japanese steel mills were positive
in their export to China.
However, due to the tightened control on export of late, the export of thick sheet
dropped to 5,400 tons in October from 29,000 tons in August,that of pulp to 2,454 tons
in October from 11,468 tons in September,
As the result a certain manufacturer is es ger to sell its 6,000" tons galvanised
sheet iron stock during; the year-end periods and at the same time the price ofalvanisea
sheet iron fell to 4260, causing confusion in the market.
Anyhow, there has cropped up a big question to Japan's future export of steel mater::
al following the all out ban on export to China. (J.EI, Dec. '50)
Part of Prouuction Goal Seems Difficult Due to Inactive Import of Raw Materials
Japan's import picture of iron ore and coking:; coal is turning gloomier dur to the
inactive import of key production material after the start of war in Korea, followed by
the international arms expansion tendency. Besides, Japan is expected to be barred from
imports from 8hina since the Japanese government announced a decree banning; exports to th'
direction on December 6, Under these circumstances Japanese industrial circles concern
ed foresee that the iron and steel industry and some other sections of our indust::es may
find it impossible for them to accomplish the output goal due to short supply of materia'.
As causes for the import inactivity the following may be cited: 1) Even w..thallotted
quotas in the foreign currency budget, traders are having; increasingi.natanees of PailurR,
to conclude import contracts beca use of price differences and short supply,'__
2) Japan
cannot expect import of iron ore as originally planned from Ame, ioa, the p:: inc; paJ. sup--
lien because America needs it for their own needs. 3) No import of coking coal seems
available from China., 4 Clumsy operation of the foreign currency budget affected the
import of industrial salt during the first six months of this year.
Coking coal. Import of 995,000 tons is regarded possible out of the total import
goal of 1,900,0 $rons for 1950, leav' about 900,000 tons yet to cover. These can
partly account for such dull import: Out of the import goal of 7000,000 tons of Kailo
coal the figures attained is a bout 200,000 tons below schedule due to shipping space sec
city. 2) Out of the planned import of 300,000 tons from India, about 120,000 tons ap-
pears unattainable. 1) Ag;a inst the goal of 650,000 tons import of American coal only
300,000 tons seems available. (Even this is doubtful of realization because of Western
aarope's urgent need for of US coal,. See below US Coal for Europe. -Ed.
In case of Japan's failure to import more from America,. in the future, the accom-
plishment of the iron and steel output goal may be impossible.
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Iron Ore. Japan can expect the import of about 1,600,000 tons as against the
annual dal of 2-million tons, but this is only .80/1. of the planned import volume.
Causes for such import slump may be traced in that the planned import of 250,000 tons
every term from Sun;ullin has remained at about200,000 tons due to the short shipping
bl1ottom,.and that the hurried import failed to show any appreciable outcome as orig,in-
n
ur b dr ng gn J g pgSSliSesupp~y; erica is regarded hopeless as is
aCk kiz;t
Industrial Salt. As against the 1950 import programme of 800,000 tons the first
quarter scored 39,000 tons and the second 42,000 tons., or about one-tenth of the antici-
pated volume. Japan expects to get 350,000 tons and 360,000 tons in the third and
fourth quarters respectively but prospects look doubtful. (J.L.I. Dec. '50)
Thailand applied Export Ban against New l emocrntic Countries
Under the US pressure, the Ministry o'State Affairs sent out a circular to the
agricultural and commercial or;en on Jan. 20, 1951, ordering the ban on export of ma-
terial supplies to new democratic countries as effective from the same date. The cir-
cular stressed the steps to be taken in enforcin the export ban. 1) Internal moa-
sures are to be taken to ensure that foodstuffs will not 6o to the areas to which the
export ban applies. The material supplies destined for these areas near to new demo-
cratic countries or from where transhipment may be made to the said are subject to
special approval aria license for these supplies may be refused. 2) If necessary, the
agricultural and commercial organs should determine the commodities to. be placed under ben
and the destinations whereto the supply of the should be barred. 31 Every export of
a large quantity of essential materials should obtain the approval by the Ministry of
State Affairs,
The emphasis on the internal measures reveals the delicate international position
the Thai government now occupies. The export controls which the Thai government has lonE.;
practised, also require governmental approval, but there a great latitude of discretion
is left for the officials in charge. It remains to be seen how the Thai government puts
the "internal measures" into practice. (T.K.P. ',31/1/'51)
European Countries May Suspend Export of Metals to China
Underl.tha 9S pressut& atnd Ue,,-eooiioa4cidiffiiuitiesxei#cb ae ccbal shortg,e, arid-tiWage
rises, the B"uropean countries may suspend export of metals to China and HK.
It is reported that the Belgium government has already announced on Jaunary 15 that
export license will be definitely refused for metal supplies scheduled to be shipped to
China. It is also circulated that orders for metal supplies by Chinese and HK merchants
for which export licences have already been obtained would be subject to cancellation.
It is the same with the French government in its attitude towards metal supplies to Gihina.
British have already greatly reduced their metal exports. It is quite possible tha,
they will suspend totally the export of metals from February 15 onward. Furthermore, the
steel industry is due to be taken over by the State on February 159 (T.K.P. 27/1/'51)
HK Government May Strengthen Control Over Metal ~xports
According to the Chief of the Department of Industry and Commerce, there is no need
to revise the existing; licensing system for metal exports; the HK Government may refuse
to issue export license any time. If and when it is necessary, certain items of metals
may be added to the list requiring export licence. This step is taken by the HK govern-
ment to make it easier for itself to obtain metal supplies from the US. (T.K.P. 1/2/'S1)
India Issued Import Licences for the let Quarter of 1951; HK's Portion Reduced by Three-
fourth
To save foreign exchanges, India has reduced the import funds and the volume of im-
port licences for the 1st quarter of 1951 to only one-fourth of the same for the similar
period in 1950. Considering the rise in commodity prices, the actual sales of HK goods
in the let quarter of 1951 will be less than one-fourth of the sales in the same period
of 1950.
Since the Indian government has already banned the export of gunny bags, cotton yarns
and even a uto tires, most of these Indian producers were previously destined for HK, it
is only natural that it will slash import quota for HK just to balance payments. The
sales of raw silk to India will be extremely difficult. Meanwhile, only a small quantity
of supplies are shipped to India. (T.K.P. 3O/1/*51)
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Trade Between HK and Indonesia Highly Active
At the present time, a ctive trade between HK and Indonesia is due to the voluminous
export of rubber from Indonesia and the low price level of HK exports. Recently, the
export of cotton goods from HK to Indonesia has been of considerable volume and on Indo-
nesia local markets, their prices are lower than that of the Indian, Japanese and British
makes (S.`i.'.Y.P. 31/1/151)
HK's Trade With Europe; Exports Increasing;
In recent time, exports from HK to Europe anct England seem to be more enthusiastic
than ordering supplies from the lager. For these exports, payments are settled by
transfer of sterling; account through London banks. Although the orders for European and
British supplies have been on the increase, importers encounter great difficultiess
1) The banks generally charge a high rate of marginal deposits - 100/0. If the supplies
ordered do not come under the categories of strategic materials, the rate would still be
above 50/0. 2) The scope of supplies available is limited. To order US goods from
England would be 20 to 3CP/o costlier than to order the same directly from the US.
(T.K.P. 31/1/'51)
Barter Trade and Tung;oil Export
.according to the estimates by the Tungoil dealers here, since the adoption of the
barter trade, the tungoil export via HK in the month of January amounts to 4,500 tons.
T;e volume of the trade is reduced by 4(Y/o as compared to the same before the US and Japan.
ese export bans, but, owing to the recent adjustment made by the Chinese trade authoritie, in respect to the export price and th the rise in international price for tungoil, the
merchants here gaineci more than ever before. It happened only after the adoption of the
barter trade. (T'.K.B. 1/2/151)
Prices of Chinese Products Continued to Climb
Owing; to the low stock am tho shortage in fresh supplies, prices of the main Chines(
proetucts here advanced to high record. The aifficuties which stand in the way for get-
ting new supplies are: 1) The Chinese trade authorities directly place a limitation to
the export of China produce. 2) Under the new barter system, the traders encountered
difficulties in importing to China, so that exports from China naturally will be reduced.
3) The prices of china produce in have advanced too fast. Under such circumstances,
{riven the export demana remaining strong, the prices for Ohinese proaucts would still be
Raw Material Trends
II. C U tdi W U D I T I i S
+iorld Demand and Supply
Before the latest upward movement of commddity prices began after the Korean war,
prices in.general were high enough to encourage maximum production. The advances which
have since taken place - and in some instance they range up to 250 per cent- are purely
inflationary. They cause tensions, friction and lifficulties in many directions.
By next spring the current production of munitions will begin to be reflected pro-
tressively in the actual consumption of raw materials, but it will be many more months be-
fore Governments, both west and east, can feel strong; enough to permit any relaxation in
their strategic stockpiling. Even if civilian consumption is out to the bone, therefore,
the threat of chaotic market conditions will continue.
In the course of the upward trend of raw material prices since last June Commodities
originating in the sterling area have shown far larger gains than the so-called "dollar
commodities." Indeed, the wine disparities in price relations between sterling; and
dollar commodities that had exi:;ted since 1945, have now been overcome.
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The UK is the world's largest importer of raw materials and its terms of trade are
adversely affected bjr the artificial increase in the prices of sterling; commodities,
although, as banker to the other sterlin?, area, the country receives the gold and dol-
lars earned by the sale of sterling; commodities at high prices. But this gain is
accompanied by a sharp increase in the US's short-term sterling debt to other sterling
countries, with all its potential threats. At the awe time, the increase in the
gold and dollar reserves results in a discontinuation of Marshall aid to the UK - and
Marshall aid has been one of the principal means by which raw material imports have
been financed in recent years - it becomes doubtful whether the vast increases in the
prices of sterling raw materials are a positive gain. (T.K.T. Dec. 150)
Commodity Movement in the Week Ending; January 20
At long last a break has occurred in the steady rise in Commodity prices. This
week the price of Cuban sugar was more than cent-a..pound cheaper; it fell to its
lowest price July. The record world crop was bound to affect the market sooner or
later, but it took time to do so. /heat and maize are also cheaper, but this may be
partly seasonal, thou;h, if it is, the fall has occurred earlier than usual.
Fibres generally have continued to rise; wool has risen by nearly 10 per cent this
week,Tu`ngsten and quicksilver are still bounding upwards; tungsten costs more than
twice as much as it di in September, and quicksilver three times as much. The U8
"grey" market for copper and zinc is rapidly developing into a black market, In these
dealings copper is se ino at about 42 cents a pound and zinc at 30 cents. Prices of
veritable oils and tallow are still rising, but rubber and tin have weakened.
Economist, 20/'51)
UK Wholesale Prices at the Double
The trend of wholesale prices in 1950 vividly illustrates the burden of rising;
costs, Throughtout the twelve months the Board of Trade's index has displayed an un-
broken rise. In the 1st quarter dot was modest, but it became sharper as the year
progressed and particularly sharp after June. By December the index had risen 21 per
cent p the largest annual increase since 1940. The rise in the food component of the
index was to some extent damped by the incidence of the subsided, but industrial ma-
terials fully reflected the rise in world commodity prices. Basic materials rose by
no less than 85% on the year, intermediate products by 22`4 and manufactured foods
WO oo and tobacco rose yo, and ui dun;' materials by 6%,
The main contribution to the higher cost of industrial materials has come from
wool, the prise of which rose by 117/o during 1950 (raw wool itself rose by 133%).
Mon-ferrous metals rose by 60?, cotton by 36% and other textiles by 29%. Most of
these increases occurred in the later part of the year and have still to filter
through into retail prices; a sharp increase in retail prices is evidently to be ex-
pected in 1951. The actual icrkjase in wholesale prices in December was only ?.o,
the smallest monthly rise since Juner'_ 13ut this slowing; down was only a temporary
phase; commodity prices have continued to bound upwards this month. Economist, 20/1/51)
Gold
The Realistic Price for Gold. Rising; prices for gold in the so-called free
gold markets of the word have served recently to lift gold values out of the doldrums.
It is true that the Korean was has led to renewed private demands for gold and to that
extent improved the outlook for S. African interests' premium gold sales. heir is
reason to believe the new hoarding demand has been more general and more widespread
than that of 1949, when supplies found their way chiefly to China. Until the Korean
war reversed the trend, price in Middle and Near eastern markets were falling through-
out the 1st half of 1950. In mid-April gold ddlivery, Macao, was quoted around 437
by July it had risen to about 442, only to fall swiftly ag:jin on reports of large sup-
plies arriving from Taiwan. Since then, prices have moved up and down on rumours of
war and peace, a state of affairs likely to continue while present political undertaintic
remain foremost in men's minds. Since the turn of the year the price has in fact been u'
to over 447 at Macao and in some other centres still higher prices have been paid, alth-
ough nothing; like the peak level of 1949,
The official price of gold has been frozen since 1934 at 435 an ounce. If it was
appropriate to the general conditions obtaining when it was fixed 16 years ago, it must
a priori bear little relevance to the totally different conditions under which we live.
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But what if any is a realistic price for the metal becomes a question of policy not of
market value when regulations for holding, using a nd dealing in gold vary in different
countries from most rigorous restriction to complete freedom and when conditions are so
remote from those of any other market in which economic forces or governemarnt writ establ?
ish prices. Perhaps at some future date, means will be found by international coopera-
tion to keep the output of gold and the price of the metal in step with 'the requirements
of world economy and with the interests of the producin countries. Until then the do-
minant factors must continue to be the views of the princi.pa~. buyer - the'US ore nment -
YT"I e px ice e will pay. iyteanwhi le the ace:~eraY ion of the decd=ne in American ;old
M
socks ni recent mont is would seem to have produced no ill-effects onTthe US eat omy.
I,.T, 2271-/'51
US Steel Prico Hike; weie hied Aver~d ;e is 40.80 a. Ton. Pre-settlement estimates of
the increase had ranged from ~>6 to X10 'a ton. The weighted average increase fot the
industry so far is actually only 0.80 per ton of fiaCiished steel. The price increase
covers only the 'cost of we e settlement` most steel firms are absorbin ; ind ma=teri-
als costs which now a vera,e more than s4 a ton.
The The steel ;.,rice increases boosted the Iron Age finished steel composite price from
3.837 cents per lb to 4.127 cents per lb, an increase of only 0.290 cents per lb. This
finished steel composite price is based on weighted shipments of 10 major finished steel
products. (I.A. 7/12'50)
Steel in UK. Re-rollers of light steel sections and small bars recently stopped
accepting new export orders because of their already heavy forward commitments. __.A
carry-over P a large number o orders for completion in 951 is expected. Exports
against existing, contracts during October totalled 301,782 tons, compared with 249,416
tons in September. It seems almost certain that total 1950 shipments will reach the
three million tons level. Meanwhile, steel plants are operating to the limit of their
present capacity and makers hope to raise the 1950 production of steel ingots and cast-
ing to fully 16m. tons, in spite of some anxiety about future supplies of fuel and scrap.
It is reported that the domestic drive for more scrap is to be intensified in an attempt
to offset reduced German imports, Demand for all types of steel is heavy. Big tonnage
of plates are wanted by the shipbuilders, while the pressure for black and galvanized
sheets is overwhelming. Tube and wire makers are heavily booked forward. There is
also an insistent demand from wagon and locomotive builders and engineering firms.
(T.k.'T. Dec '50)
The European Coal Shortage. Not only Britain but the whole of Europe is suffering;
from present insufficiency and a threatened serious scarcity of coal and meturllurgical
coke. Thedecisive factor is the inadequate output of both the UK and Western Germanys
for in 1937 exports of these two principal producers were about equal to the imports of
eight main European importers. Since the wag only in 1948 and 1949 were exports from
W. Germany and Britain significant; but even during 1949 and the first half of 1950 ex-
ports from Britain ha ve been little more than a third of those in 1937, and exports
from W. Germany about two-thirds. During Nov. 1950, the growing concern in the UK has
been duplicated in most of the coal consuming countries of W, Europe.
During; the winter British exports are almost certain to be decreased. In W. Ger-
many the Ithur's authority's decision to export 6,830,000 tons of coal during; the lst
quarter of 1951 his incurred the wrath of the German industrialists. Meanwhile Polish
coal in insufficient quantity is fetching; high prices; but Poland is likely to restrict
exports to W. Europe both because of eastern European demands and because of Western
trade restrictions. S. African coal can by no means meet demands on it; amd US coal
at over 96.a ton when delivered is again required to redress the supplies of the D1d
World, The quantity of U8 coal exports, however, will clearly depend on the demand of
US industry. (T.R.I. Dec '50)
American Coal for Europe. Europe!e imports of American coal this winter will
amount to about four million tons inc uding ,2 000 tons bought by Erk land. This is
less than Europe requires - eighteen nations recently attending the Coal committee of the
Eeonorpic Commission for Europe hoped to import in the let quarter of this year five mil-
lion tons more coal and a million tons more coke than European exporters could offer.
There is no coke for shipment from the US.
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Mature supplies are uncerta in. The Germans have been ordered by the Inter-
national khur Authority to accept an export to rget for this quarter about a million
tons hither than they desired; conceivably they will simply allow their deliveries to
run into arrear. Poland has not so complet0 ly withdrawn from the coal market in West-
ern Europe as had been expected; but it has been ra ising its almost to American levels,
so that the order of coal prices on the Continent now ranges from American, the most ex-
pensive of a 11 delivered, through Polish, Belgian, French, and British clown to German.
German coal exporters are anxious to raise their prices, and if the occupying authorities
a gree this may exercise a corredtive influence upon estimates of coal needs. (Economist
20/1/'51)
Machinery
Japanese Trade. According to a MITI survey, 1951,- 52 exports of machinery and
equipment are estimated at 4133.6m. (of which autos compriae 423m.), and the figure is
expected to increase to q501.16m. in 1953-54, Auto exports are scheduled at :160,41 and
4207.45, respectively, in 1952-53 and 1953-54. The reasons for such brisk shipments are
1) Increasing purchases by Southeast Asia , 2) the extension of facilities by the Export
Bank for plants and equipment exports, and 3) the decrease of machinery export poten-
tial in the US and European conutries. (O.E. 20/1/'51)
Price Advances & Tends to Rise further. The recent increases in the maximum prices
of petroleum products rar irk; from a farthing a gallon for 100 octane spirit, to jd..
for diesel oil for road vehicles and to a halfpenny for motor spirit) follow the oil com-
panies' re;ular half-yearly review of their freight costs and are not the result of z
increase in the price of crude oil. The American Government has, in fact, takensteps to
rreeze u of prs.ce ss a the December levels. The cost of operating tanders, as well
as the cost of internal distribution , has been rising steadily and one of the biggest
factors has itself been the increase in fuel prices. But more important is the fact
that since the start of fighting in Korea, the charter charges for tankers have risen shot.
y while tTe nwn ber of tankers available for charter has fallen. The oil companies carry
a out 50 percent of their products in their own tinders emd charter the remainder, usually
on a 5-year basis. Some of the older agreements have been made on terms which are by
present compa risons very favourable to the oil companies, but those made now are more the
100 per cent above the general. level of charges in June and will probably continue to rise
as the shortage of tankers becomes more acute. The fleets in the Far East have made hea-
vy demands on ava ilable tonnage; there are no storage facilities in Korea, and a number
of tankers are being, virtually taken out of service to not as floating depots. These are
fortunate if they complete one round trip in the time in which they would normally have
completed ten. Wore tonnage must wait until the tanker construction programme is com-
pleted. (Economist, 20/1/151)
Rubber & Rubber Products.
Japanese Rubber Goods. Exports from January through November, 1950, totalled about
1.5m. of which auto and bicycle tries and tubes accounted for ;0750,000, or one half, In
the first nine months, tire and the figure increased to X113 000 in October. The best
market was HK (one half of the total destined to this markets, followed by Burma and In-
dia. Mire and tube exports will be hard hit if shipments to HK are stopped. (O.E.
20/l/15-17 No Control of Rubber by Britain. The Government rejected a suggestion matte in the
House of Commons that it should now control the import and re-export and domesticallocatio:
of natural rubber. The suggestion was made with the idea that rubber supplies should be
barred to Soviet 1Lussia and new democracies.(S.C.M.p. 30/1/'51)
Soda Ash Caustic Soda
Japanese Production & Demand for Industrial Salt. Owing to the scarcity of salt, the
wartime destruction of soda plants and the shortage of electric power, it was not until
1948 that lpost-war reconstruct.on began to make smooth progress. The 1950-51 production
was original ypprove or gel1_eas 106Q QbdkJjrl : ,~-IgD*2_ 4#7F1 bc -paauatic soda.
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In view of the marked prosperity in the synthetic textile industry and the increasing
demand for soda products since the flareup of the Korean conflict, the October-December
goal was boosted to 51,000MT for soda ash and 58,200MT (27,200 MT for ammonia soda plant,
and 40,000 MT for electrolytic plants) for caustic soda. Almost the same goal has been
set for the January-March 1951 quarter.
This year's outlook for the soda industry is Likely to turn for the worse because
industrial salt is ge*ting shorter and shorter. According; to the soda production schedu
got the Janua ry-March 1951 quarter, the salt requirement is estimated at 230,000 MT, I,
eludint consumption for food, the total salt demand in this quarter will be 680,000MT.
The maximum supply, on the other hand, is estimated at not more than 550,000 MT (220,000
MT already contracted for, 250,000 MT coming, under long;-term contracts, and 89000 MT
brought forward from the preceding; quarter), or 138,000MT short of demand.
The 1951-52 import goal is set at 1,800,000 MT, but this appears to be an impossible
proposition. The rea sons areal) Due to the Far Eastern situation, it is hardly possi-
ble to import industrial salt from neighbouring countries, China in particular, and 2) im.
ports from Africa and other distant areas, too, will be hampered greatly by the rising
freightage. Many cif contracts have been cancelled by sellers, and plans are under way
to import salt on a fob basis. (O.E. 20/l/'51)
]'ear for Prices. There have been several important chanties recently and, though
there is now perhaps less for anxiety about the quantity of the supplies, which it will bt
possible to obtain, there are more grounds for fearing that the prices which will have to
be paid for thorn will be appreciably higher than most traders had expected. It is, un-
fortuna tely, more than likely also that difficulties will be encountered in the quality.
of the material available, and in the continuity of adequate supplies of particular types
On the 8th of November, the US Department of Agriculture had reported that the indic
ated production of the current American crop was 9,945,000 bales, which represented an in.
crease of only 76,000 bales over the October estimate, whereas the trade generally had ex
pected an increase of between 250,000 and 500,000 bales.
On the other hand the increase in the permitted volume of exports has heighten-
the anxiety of users in the US to secure their requirements, and their demand for deliver..
many more ahead than they are normally disposed to contract for, has pushed prices up stij
further. On Nov. 20, near-month futures on the NY Cotton Exchange rose above 44 cents,
surpassing:; the previous highest recorded in that market during; the boom of 1920, New-
crop deliveries have also advanced because, although control of production by acreage ally
ments and marketing quotas will not operate on the 1951 crop, doubt are now appearing whe,
ther supplies of good-quality seed will be adequate for planting all the acreage which
farmers will wish to-devote to cotton next Spring;. From Taxes, Oklahoma, and th e Miss-
ssippi Delta have come reports that this year's sped production is poor in quantity and
q uality.
Several further considerations suggest that raw cotton from other sources is more
likely to become dearer than cheaper. In conformity with an announcement made in March,
the Egyptain export on raw cotton was raised as from September 1 , from '.E2.20 to CE4.00
a 100 kilogrammes, adding; about 2d. per lb. On October 23 the Pakistan Government raise
its export tax on raw cotton to 180 rupees a bale of 400 lb - or nearly lao per lb - com-
pared with the previous rats of 40 rupees for short-stapled types and 60 rupees for long-
stapled types - or respectively, about 2*d. and 4d. per lb- and, as the icrease took effec
immedia tely, the higher rate become paya ble on cotton already bought but not yet shipped
on the day concerned. This example was followed on November 8 by the Government of India
who raised their export tax on raw cotton from 100 rupees to 400 rupees a bale of 400-1b.
that is , from 4d to is. 6d, per lb. and also introduced an export tax of 50 percent ad
va lorem on cotton waste. As from the first of November, Mexico whence supplies had agai
begun to be drawn, suppended all exports of raw cotton. (T.h.I. Dec. '50)
Price Jump,Aain, The behaviour of the wool market since the turn of the year de-
fies description. Since the second half of the selling; season opened a fortnight ago woo-
prices have risen broadly by 20 per cent compared with the december level. According to
market reports the main pressure of buying; has come from Britain and the US. American buy-
irk; has boeRp$Anlyd: ; kg 8 DWMV47-: CIA-RDP82-00457R007400610007-0
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1ven before Korea it was clear that wool would be dearer in 1950-51 than in 1949-50,
(ashen record prices were reached) owing; to the high level of consumption, the prospective
shortage in supplies and the existence of inflationary conditions. There are some signs
of but by no means definite ones, tha t civilian consumption of wool beginning to decline.
But there is no sign that inflationary conditions are likely to be curbed in the immediate
future,
When the present high cost of raw wool comes to be reflected in the prices of wool
textiles some consumers may be alarmed, despite the best efforts of manufacturers to limit
the rise by mixing wool with cheaper fibres, Whether their alarm will stop them buying; is
a nother matter. Opportunities for other froms of spending will be restricted as defence
production cuts into civilian production, andconsumer resistance to higher wool prices mi-
e,ht be small. A bigger danger facing manufacturers might be the institution of price con-
trol, though this would have to make some allowance for the present high cost of raw wool.
(Economist 20/1,'51)
Silk
P9o4pects of Japanese Silk Induttry. The 1951 outlook of the Japanese silk indus-
try appears encourajeing. After a long spell of depression following the termination of the
war, silk regained its position last year as one of the most hopeful export merchandises
under the impetus of successive accelerators.
During 1949, foreign buyers made bulky purcha sec of Japanese raw silk in anticipatic
of the possible removal of the floor price system at the beginning of 1950. Thus, they
were rather hesitant in making voluminour purchases during an early stage of last year.
Moreover, the domestic silk market was motably depressed due to bulky release of silk stock-
piles by government corporations as well as to the continued tight money situation.
Hencem silk prices remained erratic and irregular while stocks at Yokohama and Kobe
silk markets sharply increased. In order to prevent a sharp drop in silk prices, therefore
reelers were compelled either to suspend or curtail production..
Following the outbreak of the Korean war in late dune, the Japanese economic and in-
dustrial circles, particularly the textile field, were very much activated, and silk market:,
both at home and abroad presented a further a nimation. Thus, silk prices began to spurt
and reached a postwar peak of Y210,000 (20/22-A grade) in mid-August. About 28,000 bales
of stocked silk, released by closed institutions in the interim, were readily consumed as
demands proved remarkably energetic. As stocks have decreased to a record. low, most tran-?
sections are now being made for future deliveries, say within three or four months ahead.
While it can not-be denied that the present animation has partly been due to speculative
elements, the cardinal factor was a sharp increase in demand for silk both at home and abrot
paralleled with a~ gxre:?al economic recovery" following the Korean war.
Demand thus, eclipsed supply, and all stocks, including brought-overs from the preced-
ing year, appear to be completely Lone by the end of the 1950 silk year(June, 1950).The
same seems to be the case with cocoons.
The 1951 production of cocoons is certain to rise by 20J (estimated at a total of
190,000 bales in terms of silk). Kith a imost no stocks available ,hence, the 1951 supply
is not likely to exceed the eaid' 19C1y0C)O -baieei .; -- or
On the other hand, the domestic consumption, including the use for export-fabric weav-
ing, is estimated at a round 100,000 bales even conservatively, leaving 90,000 allotable for
fore &n requirements. In the meantime foreign demand for Japanese raw silk is estimated
to stand at least at 70,000 bales in the US anti 30j000.bales in Europe, Australian and the
Asia tic ountries. Thus, the demand in 1951 is expoected to exceed the supply again.
Judging from data collected by the writer during the three-month tour of the US and Euro
pean countries from February to May 1950 as well as at the international Silk Conference
which the writer attended in October, 1950 the public interest for silk has revived remark-
ably and is likely to increase internationally. The economic activity is also likely be-
come animated durinE this year. Therefore, demand for Japanese raw silk is certain to
soar. Under the circumstances, there is little fear that demand for raw silk will dwindle
especially as supply of other textile materials has been notably restricted recently.
Mulberry field acreage as of August 1, 1950 showed a total of449,170 acres, a decrease
of 1.85 per cent as compared with 457,709 acres of the precious year, according, to statistics
of the haw Silk Bureau, However, high prices for cocoons as possible, and they are utili-
zing their limited mulberry fields to the full extent by re-planting improved seedlings and
also applying fertilizer. Hence, the scheduled 20/1, gain for this year's cocoon is consider,.
ed possible.
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Technical improvement is also being, carried on by the introduction of new reeling
methods and invention of the new automatic reeling; maishines, making; it possible to make hi
r:h quality yarns at increased efficiency. (O.E. 20/1/'51)
Ira w Silk export: Japanese. In 1950, the January-August shipments topped the pze-
vious years annual total. Trade was very brisk in the follwwing, months, and the total
up to and of November was 82,290.8 bales. Thus, last year's total is estimated at more
than 90,000 bales. This year's ,onl is set at 100,000 bales, of which 50,000-60,000
bales are for the US. 4hethor or not this plan will proceed smoothly is dependent upon
US purchases. (O.] . 2.0 1/'51)
International Price Level. The firmer trend in Japanese raw silk export prices durine
October has gathered impetus; 90 per cent raws (13/15 de:nir) were quoted at fully 35s.6d.
per lb. cif 13K, for 14'ebruory- .ipril shi; ment. Towards the end of October the price was
about 31s.6d. United States iircporters have bought on the rise, while demand is particula,
ly prominent from the US and the Continent. US hosiery manufacturers have had to increase
their purchases of silk because of the reduction in the civilian use 'of nylon. Much of
the general buying is believed to be for stockpiling, Recent advises from Milan indicate'
that raw silk prices rose in one week by an average of 100 lire per kilo; 20/22 denier
Brand Exquis reached 6,600 lire, the highest figure this year. (T.h.I. Dec. '50).
Silk Confusint; Situation in New York. Leading NY silk dealers and SCAP officials ex-
pressed Confidence that the l;conomic Stabilization Administration would clarify soon what
effect the Government's price freeze has upon raw silk imports from Japan. Everyone in
the trade here agreed that the situationis extremely confusing. Meanwhile, trade is at a
standstill. Likewise, there was general understanding here that so far the Government
order has not frozen Japanese silk at 45.50 a pound.
No information is available at present on silk prices for Dec. 19 - Jan. 25 period.
The Government order sets forth that peck prices during that period on commodities shall
determine the ceiling; prices. Commodity market figures show 0,55 a pound was the high-
esy price paid here during that period for Japanese "A" grade raw silk. That price was
the nominal figure still quoted on January 29,. However, the quotation jumped to ;5.60
on January 30, but no dealings were recorded. (S?C.DI.P. 1/2/'50)
L ' 1 6 9 Lon o?i i1ax. Activity in the Conttrai flax and tow markets has resulted in a fur-
ther advance in prices. Stocks have not been allowed to accumulate and they are now ex-
tremelylow. Even the lowest grades of flax and tow are bought at any price that sellers
care to".ask. Dutch flaxes recently reached X465 a ton, compared with x.295 a ton about twc
months ago. The rapidity of the advance has made the determining; of yarn values
difficult and successive adjustments have been made by Scottish spinners. (T.R.I. Dec.
'51)
Vegetable Oils.
Groundnuts at London. Slow conditions prvailed in the groundnuts import market becau
as of the limited supplies and firm inaications; but steady bookings were made on UK ac..
count for nuts from the Gambia under official arrangements. Imports into the UK during
the first 10 months of 1950 comprised 292,966 tons decorticated and 61,816 undecorticated.
(TORSI. Dec. '50)
Oilseeds; UK i4arkets. Apart from moderate sales of India castorseed to the UK the
oilseeds market continued to be quiet, largely because of the firmness of sellers. The U.
1950 linseed corp was officially placed at 35,200,000 bushels, against 43,700,000 in 1949
the Canadian crop was 4,500,000 against 2,262,000 bushels.(T;R.1; Dec.'50)
Seedoils. International trade in s,edoils was mainly for groundnuts oil, especially
on Italian account. Prices were a little irregular by the undertone was still firm. In-
dian crude linseed oil was Q145 against #153; crude groundnut oil was X152 10s. against
9156; and Bombay castor oil first was t155 against X145 a ton c.and f. (T,R.x. Dec.'50)
The Production & Foreign Demand of Japanese Tea. According; to statistics compiled by
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the Ministry of A6riculturu and r?orestry, the area of the tea plattations under cultiva-
tion for the 1946 amounted to about 25,000 chobu (248,000 cubic km). The same stati-
stics indicated that farmers growing tea numbered 590,000 households. The entire output
for this year was 660,000 kan approximately, or 55,000,000,lbs. However, it is believed
that the actual figures exceeded those appearing in the statistics to a considerable ex-
tent. For instance, exports pf tea fpr the year 1949, destined mostly for North America
and Morocco, totalled about 17,000,000 lbs. (roughly 2,000,000 kan), while the domestic
requirements were estimated to be about 9,600,000 kan (about 80 000,000 lbs.) for a po-
pulation of 80,000,000 at the pre-war ration of 120 momme (1 lb) per capita. The gross
total hence comes out to 11,600,000 kan. Even if these figures for the domestic con-
sumption be discounted to some extent, it would not be ffiar off the mark to estimate
last year's production, in other words for the sear 1949, at 10,000,000 kan. Despite
the recent general drop in the prices-of.-.commodities, tea quotations show no signs of fol-
lowing suit. This we attribute to the heavy shortage in the supply as compared to the
demand. In order to satisfy the home demand, and a t the same time, to maintain exports
at the present level, production must be boosted to at leastLl2,000,000 kan. This goal
can must probably be reached in the course of a few years, for.such factors as the expansi
of the areas unkler tea cultivation better care of the tea plants, an increasingly large
supply of fertilizers, etc., will combine to expedite its attainment.
During the year 1949 appreciable results were obtained in the shipmetns to tea under
the open account system of trade. It merits notice that the sharp increase in tea export:
from Japan is attributable in the main to the suspension of tea exports from China. HerE
tofore, Japan and China wore the two main countries supplying green tea to the world marke-
followed by :Formosa, although the quantity was limited. The principal sourcea of the de-
mand for green tea were in Northe Africa, USA and Canada, followed by Soviet Russia. How
ever the latter country commenced cultivation of tea in the Cau as sus area some time ago
and recent reports seem to indicate that it is now in a position to satisfy the domestic
demand with indigenous products. Hence, the main overseas markets for Japan hereafter
will be limited to North Africa, US a nd Canada. However, thereare limits to this demand
for the consumption in US and Canada combined amounts to about 5,000,000 lbs, and in North
Africa, 25,000,000 lbs approximately, or a total of 30,000,000 lbs. It is hence obvious
thatexports of green tea from Japan hereafter will be affected in no small degree by the
future trend of green tea shipments from China mainland and Formosa. Moreover, whether
the qua lity of Japanese tea sufficiently matches the Itste in oversem markets is another
important factor to be considered.
At the present time, heavy shipments of green tea (Chung Mee brand, Gunpowder brand,
etc.) are being made to N. Africa. Extensive studies are currently being made in re-
spect to improvements in the methods of production a nd in the machines used for processir?
with a view to matching, the taste in theoverseas markets. (J.T.Dec.'50)
Ta iwan Green Tea to N. Africa. Since the World War II N. Africa has been the prin-
cipa 1 market for Chinese green tea. During the 1949-50 period, about 2,000 tons of
Etaiwan green was shipped to N. Africa. The fact drew the attention of Taiwan tea dealers
Since then, Taiwan green tea were exported to N. Africa in great quantity but at the expen
ce of quality. This resulted in great repugnance on the part of the N. African tea impo
ere. The President of Taiwan Tea Co, was on the wgy to N. African seeking an investigati
of market conditions in N. Africa as well as in Europe.
According to the Taiwan Tea Co., the sales abroad of Taiwan green tea in the past
year we a normal, the total beLng 3,065,000 lbs of which 2,500,000 lbs. went to S. A?pri-
ca 1 100000 lbs to British Commonwealth and 1,160,000 lbs to HK. The Taiwan Tea o. cx
poste nearly ?4,000;00? lbs' rife green tea in`1950-wit? 2,0b0~000 1bs'goin; to thetUS,' J,16()
000 tmN. Africa a nd the remainder to Europe. (S.T.Y.P. 30/1/'51)
Gunny Bags
The Indian Government imposed an export ban on gunny bays since February 1950 it is
now reported that the ban will be lifted. It is also reported that the February allocati
for gunny bags wxports to HK will be increased. As to when the Indian firms will take an
orders for the same, it is, however, uncertain and pending on the official announcement. by
the Indian Government.) The report has depressed on the black market prices for Indian
gunny bags. (S.T.Y
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us
The Import of US hearmanent on Its. The impact of rearmament has been felt in-
creasink;ly during the month of December. Evidence accumulates that supplies of in-
dustrial materials will be short and their use restricted, The orders of oNPA limit-
ing the use of essential materials in civilian use a point to the fact.
The scarcities are appearing before actual armament production is making; any consi-
derable demand on supplies, In part they are due to absorption of stocks by the enormous
consumption of metals during the past few months. In part they feflect a scaramble to ke
covered in anticipation of future requirements. Most of all, they are due to government
stockpiling.
The greatest uncertainty is the size of the wa r orders themselves and the speed with
which they will be placed. Between the possible minimum and the
ex-
penditures is a range so wide that no one can yet tell precisely what the possible ahe r maxium
uje, of materia 1s a nd labour may be. what equireemts for
Subject to these uncertainties, most elements in present outlook favour continuation
of high level of production with " a minimum of priorities unemployment", Restrictions
of supply now planned will leave the durable foals industries with enough materials to car:
on a production rate in most oases second only to 1950. The cutoff is not likely to be In
oipitous in all lines, but star ;eyed,
The general view is that markets for durable goods will shrink in 1951, both because
of the credit restrictions and the inevitable reaction from last summer's boom, during whit
business was borrowed from the future.
Naturally the trade outlook is dominated by prospective purchasing power, and this in
turn by high employment at rising wage rates and by quickening; armament orders to take up
slack where it appears , The second element is the psychology of consumers, whether the
will to buy or the will to save is uppermost, In over all terms
It during; the month of July according; to the estimates of incomes. Since July the pzopor~
tion of incomes saved has been rising toward a normal figure again.
more saving is desirable. The long-run fear is not that, spending will Fftm
bbeevery
too littleotot
clear the markets of consumers goods, but that demand will exceed supplies - in other wog
inflation.
Unfortunately the inflationary spiral has mounted further, prices has continued, upward, The steel industry, The than of commodity
eipy
pro-
cession of increases and steel prices have advanced, as rhat lissvmorelssignificant,d the publi
cation of the official consumer's price index (cost of living) for new high of 174.8 (1935-9 100), required further wa to bet gran, ranted which arlomal rose
a1
in cases where esca la tor contracts based on thisindexcare increases
in force, nearly lccas
workers covered by these contracts had already had increases since the Korean war began,
Thus is illustrated the effect of inflationary mechanisms each as escalator clauses is
prices and wage contracts. Industrial costs will be raised, price advances will work aroL
the circle, and the pa rity prices which govern farm price support programs will rise,, TI
ese developments make even more urgent the need to turn more of the income increases from
spending into sa vino and for the government to reduce its spending; in order to diminish ti
pressure on the markets . (1V[.L.E.C,Dec.150)
US Wholesale Commodity Prices. (August 1939::100)
Index Imports Domestic
Jan.1g1951 3
Foodstuffs
83.6 428.3 357.2
11 19
1
394
6
, ,5
388.1 434.1 361.1
19, 50 249.2 258
0
.
308.
.
243.7
308.1 1
The index numbers are compiled by the Bureau of Labour Statistics and are based on spar
market prices. Most of the 28 commodities are basic raw materials,
(N.Y.T. 20/1/151)
US Prce-Wade Freeze. The Government hinted at elentual rollbacks of some prices to-
day, but meanwhile set about the giga ntic task of enforcing the general US price-wage free,
decreed last night (Jan. 26)
Price Chief Micheal V. Disale, a nnounced that rollbacks will be tackled on an indivi-
dual commodity basis, "iti.ght now," he said, "the dire need is to stop the Q0rushiny price
advance in its tracks,"
9ri
I375.3
22.
83
2222.5
5
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Authorities tried last night to do this by freezing prices and wages at current level
-- all except a list of basic foods and other prices which they could not touch because
Congress gave them special treatment in the control law.
The freeze was la belled a stopgap, with price adjuitments -- and a new general wage
policy -- to be worked out a a quickly as possible, But there were immediate and stiont,
protests from labour and farm groups.
Stocks spurted upward, several commodity markets closed down for the day to await
clarification. Businessmen generally pledged support. (S.C.M.P. 28/151)
Western Europe
The Growth of Foreign (to us & ex-hussia) Reserves. In consideration of the fact
that Marshall aid to iurope has been ;aduall;y slowing down, according; to the plan, the
growth in foreign (to US) gold and dollar reserves has been phenomerr:al. The change dates
back to September 1949, when cdrrencides were realigned on a worldwide basis. The USgolu
reserve at 24:6 billion was at its zenith. Since then foreign countries `Laken collective-
~utex-xussia have probably added T100m`. to their reserves directly from new gold productic
From the surplus supply of dollars made by American loan and aid programs and other trans-
actions a$165 billion has been converted into gold, providing an overaL recovery in gold
reserves of #2.2 billion for foreign countries (ex-Russia
.
Only part of the dollars accruing to foreigners has been converted into gold. The
remainder is represented, mainly, in increased deposit balances with American banks, and
short term investment in the US market, Such dollar holdings increased $1.1 billion
from September 1949 through August, 1950 acid may have risen another half billion by the end
of November. If told and dollars are taken together, the recovery in foreign holdings
;_._-_-......,.........__
probably rugs to ,3 ,.,_or 4 billions in r___ _14 moiths. The change is for the good inso ~^ as
creased reserves provides a basis fir confidence in currency values. (lv1.L.E.C. Dec.1'50)
More Gold from Europe. The sterling area continues to run an unexpectedly large
surplus with Western Europe. The latest monthly compensation of the European Payments
Union, covering; transactions for December, showed a UK surplus of #20,444,286. A part of
this was probably earned through payments for sterling area commodities at the recently pre-
vailing high levels of prices. This surplus was financed as to 94,354,643 by the use
of existing sterling resources, i.e. pro-June 30th balancesheld by the dificit countries.
The UK is now at the stage at which, as a creditor, it receives in gold half the net
amounts due to it and makes the other half available in the form of credits to EPU.
In respect of December it recdived #8,158,929 in gold, increasing the amount so far
recerived from FlU in this form to L12,668,214. The Ulf is now a creditor in the books
v She amount o8f3 t;Gry8 W. Here is further evidence that the trend of in-EPU to ternational gold movements is stilT strongly towards. London. (Economist, 20/1/'51)
Impact of world-wide Inflation - hapid Rise in Import Prices - Commodity Agree-
ments Unlikely - Problems of Taxation. The general inflationary trend in the world
is unlike y to be modifies unless some unexpected development occurs either in inter-
national relations or in agreements between the western powers on commodity allocation
and price inflation, In Britain, although the new rearmament protgramme has had hard-
ly any real effect set on industry, the world-wide scramble for a bigger variety of raw mat-
erials and the resultant soaring of commodity prices have become the most serious concern
of British industry, particularly eneineering.
The inflationary effect on their country of the commodity scramble is as follows.
The import prices index for all articles was lower in September 1949, then it had been since
early in 1948, but since that time it has increased steadily until in October; it was 143
(In all cases appearing hereafter, June 1947;x100), The prices of raw materials were the
main burden of the rise; and in October the raw materials' import prices index was 175 per
cent of that in June 1947. Wholesale prices in this country have inevitably followed the
imports prices rise(from 135 in June 1950 to 153 in October, 1950), Wholesale prices of
industrial manufactures which rose (from 148 in June, 1950 to 163 in September, 1950 are
being more affected than food. So far the effect on reta it prices has been comparatively
sma 11 the index is only three points above what it was in September * 1949, vdat;es have
risen least since devaluation.
Furhter rises in retail prices in the beginning; of 1951 are unavoidable; and not only
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the recent ent;ineerirk; wades agreement but also other pending; wages have yet to be reflec
ad in the wage index. Such increases in wages are really overdue, and although the fore
bearance of the year, 1950, has till now tempered the inflationary movement in the oountr:
the impact of wt ;e increases will add to it.
The impetus to the general infla tionary trend both in Britain and abroad would lose
its strength if international agreement could be reached on raw material supplies. But
the recent failure of the attempt to work any arrangement for wool as well as the previo
failure of the talks on tin, suggest that it would be futile to expect any effective comp
dity agreements.
The Chancellor's quandary, when he comes to his Budget of 1951, is on the one hand t}
income tax increases would add to the clamour about the effect of wage increases, and on t
other hand there is an increasing clear case for decreasing texes on industrial profits bb
sa use Of the growing repla cement cost and working; expenses. The possible riinoit down
of real assets in many firms because of monetary over-statement of gross profits in the
year since the war is causing concern,
British Imports and Exports Indexes.
1947 average 100
Import
Export
September, 1949
112
112
June, 1950
132
119
September, 1950
138
121
(T.R.I.Dec. '50)
Japan?
Vital Financial Issues. International prices have been on a steady advance due to a
world-wine rearmament race, and this tendency is likely-to continue for some time to come
The price trend in.Japa n cannot stand immune to this international development.
The 1949-50 budget was based on a super-austerity policy and the real outcome was me:
than well balanced (with the excess of withdrawals reaching about 990,000 million), while
the 1950-51 budget, equally based on an austerity policy, turned out to be less satisfact~
ily balanced and there was a sear that it mi.pht and in an excess payment of about Jc10,0c
million. The 1951-52 budget was likely to result in a greater excess of 1,ayments.
An increased note would become inevitable due to the export excess in commercial as-
count if a shorta,,e of funds resulting from an increase ~_n foreign currency holdings in
the Foreign Special Account was not well covered with a transfer from financial funds.
The 1951- 52 budget might well. alleviate the suer-austerity effects as compared wit.:
the 1949-50 or 1950-51 budget.. If, at the same time, the expense ftr supplies, which foil
the pivot of the Budgetary plan,, was complied with the possible price gain during the nex-
fiscal year estimated only at 10 per cant, a supplementary expenditure may become necossai
in the course of the budgetary execution, However, whether finances are well balanced o
not may notbe well judged on the basis of total spending; for the year concerned. If the
budget results in the excess of payments at the end of a year but registers an excess of
withdrawals during; the first half of the year, as was the case during the past few years,
delationary effects will not be avoided.
Another problem demanding, close attention is a study of foreign currency holdings.
In case imports fail to increase while exports increase or imports decrease while exports
.remain uncharged, even the maintenance of a financia 1 balance through the transfer of fun,
required for increasing currency holdings from the general account will not play any parti
cular role in checking inflation.
Under such circumstance, domestic raw material supplies will become exhausted due to
insufficient jp~orts nd prices ;111 to to rice. entually imports should be inrer,
e oar ex ores should be pressed own in order to cope such a situation with.
Shifting to reckless "deficit" finances should be strictly avoided. However, it is
equally important to guard against the neglect of long-term economic balance, supported wi.
goods in a. wild pursuit after a financial bat ance in the immediate future. (O.E. 20/l/'F
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outli E~xstexn Asia
Stop-Gap Economic Assistance. The US Economic Co-operation Administrator, iMr
William Foster expects this week to receive authority to spend 05 ,000,000 in stop-t,ap
economic assistance to six South-east Asian countries.
This ready cash will enable the United States to start almost immediately programmes
desi'-ned to hell) the Philippines, Burma, Indo-0hina, Thailand, and Formosa muster economi
strength to resist Cormnunism. the money would come from unspent European aid funds
and would permit the ECA to launch its Southeast Asian assistance programmes without
waiting; for new appropriations from Congress.
The administration is obtaining; its special Southeast Asian aid fund by shifting
money from one pocket to another. In voting forei4h assistance funds this year, Congreo,
earmarked most for Europe but it gave the President authority to shift three per cent to
other parts of the world if he saw fit.
ECA reportedly asked the Budget Bureau for permission to shift 75,Op0,Ooo from
Europe to Southeast Asia. (S.C.tVi.l. 1/2/'51)
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A BhE V I a T I ON S
.V.`/. o.? .........................rr..? Business Week.
C.C.J. .............................. Chamber of Commerce Journal.
C.E.B. .............................. Czechoslovak Economic Bulletin.
C.F. ................................ The Corrmlerco & Finance Chronicle.
C.M. ................................ The China Mail.
:U.C.Q. .............................. Daily Commodity Quotations.
Economist The Economist.
B.W. .............. .................. Eastern World.
F.C.W. Forei,n Commerce Weekly.
F#E.E.h. ............................ Far Eastern Economic Review.
H.S. ................................ Honrkon Standard.
H.T.. ................................ Hon;konE; X'elet;raph,
I.A. ................................ Iron ke.
I.T.B. .............................. Indian, Trade Bulletin.
K.H.Y.P. Kung; fliurl; Yih Pao.
J.F.C. Journal of Finance & Commerce.
J.E.I. .... ......... Japanese Exporters & Importers.
J.I.T.B.B. .......................... Japanese International Trade Board Bulletin.
L.T. ...............?................ London Times.
N.C>C.C. New Commonwealth and Crown Coloniet.
N.Y.T. .............................. New York Times.
O.E. ................................ The Oriental Economy.
S.C a4.P. ............................ Sauth China Mornin;:; Post.
Specta tor The Spectator.
S.T.H.P. Shuang Tsin Hui Pao.
S.T.Y.P. Sin Tao Yih i'ao.
S.C,B. to ........................... Survey of Pea
Tea ................................. Tea & Coffee.
T.M.A. ............................. The Textile M.:rcury & Ar7os.
T. ~ I'~ ld ........ .... The Promotion News.
.................. , UN Economic Commission for
Asia & the Far East.
T.lc.T. The Times, Review of Industry.
US. #.B. B. ......................... US Federal Reserve Board Bulletin.
US News. US News & World Report.
W.J.S. ............. ................. The Wall Street Journal.
US D.C.B. US Department of Commerce Bulletin.
VJ.LVI.f3. .............................. World Market Bulletin.
wewol'- .............................. VWaa Wei Pao.
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