§ Mr. Pethick-Lawrence (by Private Notice)
asked the Chancellor of the Exchequer whether he has any statement to make as to proposals for assisting to maintain the stability of the sterling value of the Chinese dollar?
§ The Chancellor of the Exchequer (Sir John Simon)
Yes, Sir. The stability of the Chinese dollar is a matter of great importance to this country in view of our financial and economic relations with China. The Chinese Government have achieved considerable success in their efforts to maintain the convertibility of Chinese currency for trade transactions, to limit its depreciation in exchange against sterling and to keep the rate reasonably stable for many months. They have informed His Majesty's Government that they intend to continue their existing monetary policy and that, as part of that policy, they desire to establish a stabilisation fund of £10,000,000 in addition to their other reserves. They have invited the two Chinese Government banks to subscribe a total of £5,000,000 to the fund and the two British banks, namely, the Hong Kong and Shanghai 2148 Bank and the Chartered Bank, to subscribe the further £5,000,000 between them. The British banks have agreed to subscribe these amounts subject to receiving an undertaking from the Treasury to reimburse them for any loss that might be incurred when the fund is wound up. The arrangement would be that the fund would operate for 12 months, but it could be continued for further periods of six months by agreement; if the necessity arose, however, the fund could be wound up at any earlier time.
His Majesty's Government would welcome the setting up of this stabilisation fund, the successful working of which would be of material assistance to British trade and enterprise in China, and the Treasury have agreed, subject to legislative approval being obtained, to give to these British banks the guarantee against loss for which they ask.
A Bill is being prepared, and I hope to be able to present it early next week.
§ Mr. Pethick-Lawrence
Without, of course, anticipating either the major issues or the minor details of the Bill, may I take it that if the Exchequer is to guarantee any loss on the winding-up of the fund, in the possibility of any profit being made that also would be provided for in the Bill?
§ Sir J. Simon
Yes, Sir, that is the nature of the arrangement. The two British banks are putting up, as the House appreciates, under this arrangement the sum of £5,000,000, and, of course, the first charge on any result would be to indemnify them, but as soon as that has. been done any further profit which would come to the share of the British banks would be transferred to the British Treasury.
§ Mr. Bellenger
Does the stability of the Chinese dollar concern other countries beside our own, and have prior consultations taken place with the United States?
§ Sir J. Simon
The action taken will, I think, be generally approved. Other countries beside our own have made contributions in different forms, and I hope the House will think, when the Bill is presented, that this is a suitable contribution for this country to make.
§ Mr. Stephen
Since the Treasury is to bear the full loss if there is a loss, would 2149 it not be better for the Treasury to provide the money instead of the banks, and so get the whole of the profit?
§ Sir J. Simon
Yes, the arrangement is one by which the management of the stabilisation fund, which is always of course a technical matter, is in the hands of a committee on which there will be' an element which is responsible to the British Government.