Continuously substantial outflows of silver from Shanghai are ap-
parently partly result of fear of silver embargo or of increase in export
tax on silver. In my opinion national embargo unlikely at present but
increase in export tax is apt to follow considerable further outflow.
[Rogers.]                                                   Gpxw


033.1100 Rogers, James H./82: Telegram
    The Ambassador in Japan (Grew) to the Secretary of State

                                      ToKYo, July 11, 1934-4 p. m.
                                    [Received July 11-8: 25 a. m.]
  155. For Morgenthau from Rogers. Your cable 116, July 9, 2 p. M.2'
Silver drain from Shanghai small but persistent. Effect to date is
apparently negligible except that resulting rumors of silver embargo,
higher silver export tax or Chinese dollar devaluation have added to
the uncertainties created by the recent indefinite silver price-rising
program in United States and have had slightly unsettling effect on
Chinese trade. So far am unable to ascertain significance gold export
but apparently not serious.
  In Japan effects are nil.
  From conversations with Finance Minister Kung in Peiping June
27 I think immediate protective action by Nanking Government is
unlikely unless silver outflow increases considerably but if drain per-
sists eventual increase in silver export tax is not improbable in spite
of resulting enhanced smuggling difficulties foreseen.
  Because of practical impossibility of enforcement, silver embargo
by Nanking Government will be avoided if possible although pro-
vincial embargoes may increase. Also silver dollar devaluation
rumors here unfounded. In a chaotic money system like that of
China the difficulties would be very great and are appreciated by the
Finance Minister.
  Increased silver outflows from China seem to me probable if price
is further raised and not unlikely if present price is maintained.
Yesterday's rates in Shanghai yielded 6 percent profit on shipments to
New York after export tax and further early shipments were tenta-
tively in prospect.
  Apparently the very favorable reception of President's silver mes-
sage and ensuing legislation which brought temporary stability to
Chinese exchange at a rate considered constructive by leading Chinese
business and banking interests has been considerably tempered by
recent rises in silver price, wider exchange fluctuations and more
persistent silver outflow. [Rogers.]                         GRW

  21 Not printed.



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