Page:League of Nations-Appeal by the Chinese Government.pdf/99

 In addition to what it will be able to salvage from the old banks, the Central Bank has a Japanese loan reported at 20,000,000 Yen and a subscription to its capital of $7,500,000 (silver) from the "Manchukuo Government" on which to establish itself. The Bank has planned to unify all the Manchurian currencies by redeeming them for new notes at rates which have been officially prescribed as from July 1st, 1932. These new notes are based on the silver dollar and are to be covered to the extent of at least 30 per cent by silver, gold, foreign currencies or deposits. Whether or not the new currency is to be convertible on demand and without limit into hard money is not made clear in official pronouncements. The old notes will be permitted to circulate for two years from the passage of the Conversion Act, but will not be valid after that time.

The order for the new Central Bank notes has been placed with the Japanese Government, but thus far neither the notes nor the new hard money are in circulation. The present currencies of Manchuria remain what they were prior to September 18th, 1931, with the exception that the notes are being surcharged with the signature of Mr. Yung-hou (the President of the new Central Bank) as they pass through the various banks.

It is not clear how the new "Manchukuo" Bank can hope to accomplish its ambitious programme of unifying and stabilising all the present Manchurian currencies with the limited amount of capital at its disposal. The resources inherited from the old provincial banking institutions with the addition of a loan from Japanese banks and a subscription to its capital from the "Manchukuo Government" seem entirely inadequate for the purpose. Moreover, it is not clear on what basis the financial relations between the Bank and the "Manchukuo Government" will be established. According to the preliminary "Manchukuo" budget supplied to the Commission by the Finance Minister, "Manchukuo" expects to face a deficit of over 20,000,000 Yuan during its first year of existence. According to the Minister, this was to be covered by a loan from the Central Bank (not then in existence). A Government which subscribes 7,500,000 Yuan to its bank and then borrows over 20,000,000 Yuan from it to balance its budget is not establishing either its Central Bank or its budget on a sound financial basis.

Unless the Central Bank can obtain more actual hard money than it now appears to possess, it can hardly hope to unify and stabilise all Manchurian currencies on a convertible silver-dollar basis. Even if it were to succeed in creating a currency which was uniform though not convertible, it would possibly have accomplished something, but even a uniform currency the stability of which is not guaranteed by conversion falls short of the requirements of a sound monetary system.

In regard to various public utilities, as well as in regard to the railways, arrangements have been made which have tended to link up the Chinese and Japanese systems. Before the outbreak at Mukden, the Japanese were anxious to bring this about, but the Chinese consistently refused to give their consent. Between September 18th, however, and the formation of