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 The documents supplied by the Changchun authorities state that a number of taxes have already been abolished, while others have been reduced. Hopes are expressed that readjustment of Government enterprises and Government-owned resources will increase revenue and that the eventual reduction of the military forces will lessen expenditure. However, for the time being, the financial position of the new State is unsatisfactory. Guerilla warfare has kept military expenditure high, while, at the same time, the Government is not receiving revenues from various normal sources. Expenditure for the first year is now roughly estimated at $85,000,000, against revenue $65,000,000, showing a deficit of $20,000,000, which it is intended to cover by a loan from the newly established Central Bank as explained hereafter.

The Government declared its intentions, as financial conditions improve, to spend as much as possible of its revenue upon education, public welfare, and development of the country, including reclamation of waste land, exploitation of mineral and forestry resources, and extension of the system of communications. It states that it will welcome foreign financial assistance in the development of the country, and that it will adhere to the principles of Equal Opportunity and of the Open Door.

The Government has already begun to re-open primary and secondary schools, and it intends to train a large number of teachers who will thoroughly understand the spirit and policies of the new State. A new curriculum is to be adopted, new text-books compiled, and all anti-foreign education abolished. The new educational system will aim to improve primary schools and to stress vocational education, the training of the primary school-teachers, and the teaching of sound ideas as to sanitary living. The teaching of English and Japanese is to be compulsory in the middle schools, and of Japanese is to be voluntary in the primary schools.

The "Manchukuo" authorities have decided that, in the domain of justice, the interference of administrative authorities should not be tolerated. The status of judicial officers is guaranteed by the law, and their salaries are to be adequate. The qualifications for judicial positions will be raised. Extra-territorial rights, for the time being, will be respected, but the Government intends to start negotiations with foreign Powers for their abolition as soon as adequate reforms in the present system shall have been effected. The police are to be properly selected, trained and paid, and completely separated from the Army, which is not to be allowed to usurp police functions.

Re-organisation of the Army is planned, but, since at present it consists largely of the old Manchurian soldiery, caution is felt to be necessary in order to avoid increasing discontent and mutiny.

The Central Bank of "Manchukuo" was established on June 14th, and officially opened its doors for business on July 1st. The Bank has its head offices in Changchun, the capital of "Manchukuo", and branches and sub-branches to the number of 170 in most of the cities of Manchuria.

The Bank was organised as a joint-stock company with a charter to run for thirty years. Its first officers were Chinese and Japanese bankers and financiers. It was empowered to "regulate the circulation of the domestic currency, maintain its stability and control the financing service". The capital of the bank was authorised at $30,000,000 (silver) and permission was given it to issue notes against a specie reserve of at least 30%,

The old provincial banks, including the Frontier Bank, were amalgamated with the new Central Bank, and their entire businesses, including affiliated enterprises, were turned over to it. Provision was further made for liquidating the non-Manchurian branches of the old provincial banks.