Motion made, and Question proposed,
That a sum not exceeding £5,000,000, be granted to His Majesty, to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1945, to reimburse to certain British Banks their subscriptions to the Chinese Currency Stabilisation Fund, 1934.
§ The Financial Secretary to the Treasury (Mr. Peake)
I think I ought to say a word or two upon this Supplementary Estimate, because it is unusual in form and substantial in amount. For that reason there is a very full note in Part III of the Estimate, on page 12 of the Paper, setting out the circumstances as regards this item of £5,000,000. Put very briefly, what it amounts to is that we propose to meet prematurely a guarantee, which we cannot in any event escape, in order to avoid two consequences. The first of the consequences of our not taking this course would be to put and to maintain certain Chinese banks in a position of continuous default, in circumstances over which they have no control and with which we have very great sympathy. The second object of meeting this guarantee prematurely at the present stage is to avoid piling up a liability on the Treasury at a rate of interest of 2¾ per cent. Under the proposed arrangements by which the guarantee is met now instead of being deferred to a later date, the Treasury will stand in the shoes of the British banks concerned with a view to recovering any assets which may be realisable when circumstances permit this Fund to be wound up. I hope that after this explanation the Committee will agree that it is wise policy to pursue this course at the present time.
§ Captain Duncan (Kensington, North)
I do not wish to disagree with this Vote. As I understand it, it is to assist Chinese banks to avoid going into default and piling up interest rates, but I should like to know what will be the position of the Treasury as regards the recovery of this sum in future years. If all goes well, if China wins her war against Japan and peace returns to that distressed country, will not only the interest rates but the capital be recoverable from the Chinese banks, or is it only the interest rates that are recoverable?
§ Sir S. Reed
My right hon. Friend has referred to certain assets. Are there any assets? Is not this equivalent to a free grant which will be a net charge on the Treasury? Ought we not to face up to that at once and not pretend that there are potential assets which will not be realisable at any time?
Have the British banks received the interest at the rate of 2¾ per cent, during the whole period of the loan?
§ Mr. Peake
The answer to the hon. Member for The Wrekin (Mr. Colegate) is that interest has been paid in full till recently and will be paid up to the date of the repayment to the banks. In reply to the hon. and gallant Member for North Kensington (Captain Duncan) and to the hon. Member for Aylesbury (Sir S. Reed) all I can say is that the future position is very uncertain. The whole matter is complicated, as my hon. Friends are aware, by the further assistance, which was given in the year 1941, when the Stabilisation Board was established and the United States came in with a contribution of 50,000,000 dollars, the Treasury at that time putting in a further £5,000,000. Those sums have come back, but in the present state of affairs in China it is difficult for us to say what will come back eventually or whether anything will come back. I myself hope that in the settlement of peace terms with Japan we might make some provision for these sums to be met.
§ Question put, and agreed to.