ECONOMIC

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000600200146-9
• Release Decision: RIPPUB
• Original Classification: R
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: June 29, 2011
• Sequence Number: 146
• Publication Date: July 12, 1948
• Content Type: REPORT

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C!JS .CATION.
CENTRAL .IN - NCY REPORT
PLACE
ACQUIRED China
DATE OF
$N@'Oltab~TIOII 1948
b o. c oIA00 MTV i 1uuAia snsu niiipnuaM 00 ms mw005
0518 (0510550 10 001 040000 l0 00 00000001100 501005 i0 500?
k11f100:01 /AS., 10 000en011 a 11113 5050 n 50001000. 000?
,*1(0 151001141A10 MRSU"10 15 0091 N Y00 0051 5b1 10 05011100
A0 005500'11000WYt OY 11110105//50 005007.
OATF D3STR. , l2 July,.
NO. OF PAGES 6
NO. OF. ENCLS.
(.IS*to BELOW)
SUPPLEMENT TO
REPORT NO.
THIS IS UNEVALUATED INFORMATION FOR THE RESE
USE OF TRAINED INTELLIGENCE ANALYSTS
SOURCE Chin se periodical, Cep? Bank MonthIv. Vol III, No 5, Uay 291'8.
(Translation spedifimlly requested.
A REV.TEW CIF THE'CBINF. E.ECOIIDMIC SITUA'"'')N UURItIG APRIL 1948
Shou Chin-wen
%;c= odi*,y prices for the month of kprtl continued to rise, but the
rite of increase dropped eonaiderably from that rsgistered for previous
months L?i 1948. Aocordinc to the wholesale index for Shang-hai, prices
rwae 19.9 percent in April c oared to an average in:rease of 31 poroent
for the s irst tour months of 1943 and 46.7 for the fire;; throe ncntha.
The main reason for the aloedoevn in inflation was a constri:c+ior of the,
money =,het, with a subsequent decrease in purchasi.n-, power.
It. FIIULMIAL IFACIMT
In a aomperisor', a? prices posted by the Central Bank for the last
weeks in Ltaroh and April., the ;mica of ;roll r:-so 26.9 nrcont and that of
pwe silver, 8.5 percent.
B. . FQre n?e
On 6 April foreign exnhange rates underwent further reorganisation.
American rates increased 27 percent,.from 05:,000 CIE to ens American
dollar to 324,000 ytan. En);lieh rates advanced to a comparable degree,
from 765,000 ytlan per isaglish unit to 972,000.
ARMY
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The fee charged by bunks for
purchasing and soling in ioroign exchange
also underwent realigrrent on,6 April, the rate inercL 1r fioL1 3,500 yfann
p.r American dollar to 4,000, and from .:,500 per British pound to 12,500.
C.
On 4 April 1948 a Joint orcur was ibaued by the Ministries of Finance
and Economic Affairs to the Shang-hai Stock Exchange to the effect that
from 5 April the practice of deferring payments for purchased securities
was to be discontinued. A wave of selling followed the announcement, lead-
ing to a declin
i
h
e
n s
are prices on the opi df thk
enngay oe wee. On the
following day, however, high quotations for foreign exchange here posted
and the market recovered. During the first week, Wing On Textiles shares
had a high of 2,050 ytkan, and a low of 1,31.5, reprosentiag a margin of
fluctuation of more than 705 ytan. After the increase in foreign exchange
rates was posted, foreign shares rose rapidly, reaching a new high on the
fourth day of the week and then retiring somewhat on the fifth and sixth
days. For the week, Ewa Cotton showed a high of 2,600,000 yfan and a low
of 1,P10,000, a fluctuation of 790,000 ytkin. Consolidated Bonds Type C
posted a hi of 113,000 ydan during the week and a low of 87,000, a
margin of 26,000.
The money market was restricted during; the second weak and shares
were ins depressed condition. The amount of exchange taking place was
also greatly decreased as compared to the }Ycavious week
11 A-
O
T
.
.
n
extiles
registered a high of 1,950 and a low of 1,745 yftn. Demands for foreign
shares ran strong following rumor of a change in foreign exchange rates,
with BooCootton registering ay high of 2,720,000 and a low of 2,400,000.
high o
0-000 y n and a low o 19000
.,,.
Domestic shares for the third week showed little fluctuation; Wing
C-n Textiles reached a high of 2
118 and a low
f 1
86
,
o
,
5 A sudden c
.on-
traction of the black market in gold notes and Hongkong exchange brought
about an increase in the val
f
ue o
foreign shars E Ctts
e;wooon regitered
oxtsane, of 2,960,000 and 2,730,000. Consolidated Bonds also advanced,
Consolidated C registering a high of 124,000 yfan and a low of 96,000.
from Domestic ?sue r`esMconti wed-tobeysteady in the fourth weak a:a, eaide
snares and Consolidated Bonds are an
iollown:
Uiug On Textiles, 2,250 and 1,979; two Cotton, 3,830,000 and 3,.I 0,OO0;,
Consolidated C- 18
000 and 108 nun ..d..
,
~? .-J1tZ:fraB
A loose money rnorkct at Shang-had over the month resulted in a depreci-
ation is interest rates, to black market rate calculated yean per y0an per
monthr ffaal b~ to 0.223 oy the end of the month from n high of approximatel,v
ginsaing
The call l
~
oan rate oleaed at 6 y0 Nha
an.o cnge was
rev~tee ed forrcal.l,an-ratos, calculated in yten per thousanud ytlan per of M%4~
of the Trade Aesooiations a . ? Yens ono xanose .
( wag-yeh, and Treasury Bondb, euoted at 6 Wan,
There were three reasons for the existence of a loose money rerkst
duriru the month of April: (1) Commodity prices were stabilized and the
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the loans were made. The Central Bank floated an issue of ahort'tona
NationalTreasury Notes on 30 April, but they appeared on the rmrket too,
late to have a noticeable effect on Apr'..'. activities.
creasing the amount of capital on the market by more than ozo trillion ytlan.
(3) Agricultural loans for the most part flowed back into bean -hei after
carkot situation trays slow;rith Yhc sc: u1 -tt t ct ~r.r.' ,'. gat ti ,h. {ti) +,,
Internet on short-term American Treasury Notos.wao :smell on 31 !.arch, in-
The total number of belle cleared in Shang-hai during the month of
April reached 5,628,223, an increase of 158,830 over the nrovious month.
Calculated monetarily, the bills roprc',-~nted a total of 1,42;','7fy;P_,R1,?8,8,83
yfian, an increase of 122,307,570,671,709 over Larch totals. 1Si.''s returned
amounted to 83,083, a decrease of 30,168 over }.larch. Value of bills returned
totalled 2,262,246,675,564 ytan, a decrease of 2,638,373,158,104.
III. ECONOEIC AILLI2IISTRATIVE ACTIVITIES
expenditure. The objectives of Ministry of Finance activities may be
divided into three parts:
held on 13 Lpril 1948, Finance Minister Ift Hung-ohtn reported on the
present financial, monetary, ar. trade situat1oni
Postwar economic policies wore designed to repair the after-effects
of the war, balance the budget, stabilize prices, speed production, etc.
Controls over raw cotton, yarn, and cloth were established and the tax
laws revised in order to achieve .a gradual balance between revenue and
1. Correlate rebellion suppression, national reconstrnation and
mobilization of manpower, resources and finances.
3. Gradually stabilize the currency by balancing revenues and
expenditures, providing a basis for reform of the currency system.
National Treasury -- An unfavorable balance of 30 percent existed before
the war, anfd t) a same condition, more intensified, has ceni inuod until
the present time. This year the government, for rebellion-suppression
Ministry of Finance are as follows:
1. Th favorable balance between receipts and disbursements in the
2. Taxes - Tax reform has been introducod to expand revenusc am'
ensure equitable distribution of the tax load. The income tax to the most
purposes, divided the budget into two types, general and special, and
eunssntrated on maintaining a balance in the Cntral budget only.
important of the direct taxes and has been revised to meet all needs. Anti-
arsuBg].ing activities have been diligently ; uroued, especially in the south.
Lest yens more than 20,000 cases of discovery and arrest were entered, and
oonfi.soatod goods amounted to ovar 3 billion yffan. So far this year there
have been over 2,900 arrests. An antissn gling agreement his been nde with
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Hongkong and one is being negotiated with Macao.
3. Financial Controls - In regard to finance, the emphasis has been
on contraction of credit, strict control over banking, and the rmking of
food loans, production loans, and agricultural loans. The objective of
the loan nolicy is entirely to expand production.
/~. Printing of "Fa-pi" -- The total amount of "fa-pi" issued up to
the end of last month (April) amounted o more than trillion ytian.
Income from the total amount of sales fof U.S. goods was used for "fa-pi"
reserve.
5. International Trade -- Foreign trade transactions are regulated by
the Central Bank of China. The export of goods was encoura~god on the one
hand and imports expanded on the other. In addition, a flexible foreign
remittances policy has been adopted.
6. Local Finances -- Both provinces and hsiens are in bead financial
condition. The Ministry of Vinance has again adopted a now system for
income and expenditure in accordance'with the situation existing in
individual provinces. Sufficiency in local financial resouroos is necessary
for complete self rule and to comply with the constitution.
(End of Finance Minister's report)
The next speaker was Ch'on Ch'i-t'ion, Minister cf Lannomic Affairs:
North China and the Northeast are self-sufficient in regard to coal,
and the Northwest is improving, but the situation is unsetisfeotory in
South and Central China. At present the mines in the Southern Rusi section
are increasing production to supply the Nanching-- Shaag-hkl area.
The present policy with regard to industry is to concentrate and
expand the textile industry first and develop others later. Lfforts are
being directed towards utilizing yarn to secure foreign exchange, and
competing in the South seas "nrket. The Central Bank is strengthening
the ih-pi reserve.
(End of Report by Minister of Economic Affairs)
Ti To-wet then gave a report on communications:
At present there are only 600 kilometers of rrilway lines operating
in the Northeast. In North and Central China the Lung-Bat and Pei.Ning
lima are still open, but the Ghaao-Chi and ChengT'ai are completely
closed. In South China, the Ttleh-Zinn is adding a bridge and the Cho-Ken
is open from htrig-ohou to Zion-ch'ang. The total mileage of the co try
Open to traffic amounts to only 13,000 kilometers. The route Sig/from
lSeng-c?wu.eren. to Ti-hue in Sinkiang has been divided into sections for
purpoass of repair. Sections extend from Kuang-thou (Canton) to NSu-thou,
Lori-thou to Nuei-rang, Chung-Ch'ing to Ch'eng-tu, Ch'eng-tu to Tien-shut,
and Tien-ahni to Ti-has.
Highways are in such the some situation as railroads. .here are now
name than 1,606 kilometers of highways in Sinkiang.
As for shipping, the total tonnage is now 1,03C,000 and routes have
been extended to the South Sees.
There has been some progress in stabilizing air travel, one a route
has been established to San Francisco.
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Telegraph equipment is now more extensive than b,-:fore the war and the
The postal aervice handled one billion pieces of mail over the past
year.
service is faster.
End of Report by Minister of Communications)
IV. FLOATING OF SHORT-T1 Rl NhTIOhAL TBIASURY DDON1S
Central Bank on 30 April, and were discounted to 87.3 percont. A 10-million-
National Treasury Bond Act was pissed by the Legislative YOan on 20 April.
Bonds are of three types, 1, 2, and 3 months, and in five denominations,
10. million, 50 million, 100 million, 500 million, end one billion y0an.
Interest rate is fixed at 5 percent der month, to be paid with the principal
y0sn one-month bond purchased on that day would thus cost the buyer
8,730,000 and would return his 10,500,000 yflan at the and of the month,
represonting a profit of over 20 percent.
established in April 1947 to promote cooperation with conmeroial banks,
aid productive enterprises, and encourage exports and the circulation of
articlen of daily mcessity. The function of the Commission it this respect
bar 1947, loans amounting to 74,140,000,000 ykan were approved.Industrial
..Dens amounted to 91.3 percent of the total; export loans, 4.5 portent;
import bill of exchange .i+oans, 2 percent; and export bill of exchange :;.cans,
2.2 percent.
banks and finaaeial consortiums.
According to the organizational rngu]atione of the new Commission,
its functions are outlined as follower
]. To decide on natters concerning discount and loan policies of
the Central Bank.
directors. The scope of the Commission Is thus broadened beyond corr!!ercial
four government banks held or. 11 March 1948, alleence *as rw, 3 for the
re-establishment of the Discount and loan Commission of the Central Hank.
The Commission is empowered to review all discount matters involved in
business bane extended by the various banking authorities, and to decide
on amounts and interest/ rafiaa ?ollorlrg study of the market situation. At
the 362d session of the twat of directors held on 8 April it was decided
to rm:ss all !mwlmsa loan plans formulated by the various banking agencies
subject to an opinion by the Commission and a decision by the board of
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To decide on rediscount rates and. on interest rates on joano,
3. To deal with other nmttors concernirL loans and discounts.
The Commission held an inauguration conference on 27 April. The
governor of the Central Bank, Chang Chia-ao, acted as ehairrian and
attendant conference members were Hs9 Pai-ytan, Li Ming, Alfa Chi-chtings
Mao Ti-hue, Liu Eung-yft, Huo Pao-shu, and Chen Hsi-shui, ztth Fang
Shan-kuei as chief secretary.
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