EXPLAINS CENTRAL CONTROL OF FLUID CAPITAL AND PRICE STABILIZATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000600310659-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: August 12, 2011
• Sequence Number: 659
• Publication Date: June 2, 1950
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/08/17: CIA-RDP80-00809A000600310659-6
CLASSIFICATION CONFIDENTIAL CUP FIf1FP1T!A!
CENTRAL INTELLIGENCE A( hG . P:3R
INFORMATION FROM
FOREIGN DOCUMENTS OR RADIO BROADC'A 7h Cr I'0.
COUNTRY China r,;ATE OF
SUBJECT Economic - Fiscal control iNFOPMATION 1950
HOW DATE DIST. a, Jun 1950
PUBLISHED Daily newspapers
WHERE
PUBLISHED Shanghai; Canton; Hong Kong NO. OF PAGES 2
DATE
PUBLISHED 17 Apr - 7 May 1950
,LANGUAGE
SUPPLEMENT TO
REPORT NO.
EXPLAINS CENTRAL CONTROL OF FLUID CAPITAL
AND PRICE STABILIZATION
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The idea of control of the nation's fluid capital by the national bank,
that is, the People's Bank of China, is that the bank shall become the re-
pository for the funds of all government enterprises as well as for much of
the nongovernment capital. The bank may accomplish this by becoming the
agency for most collections and disbursements of business intercourse such as
collection of utility bills, sales of transportation tickets, issuance of
travel insurance, and a multitude of other things in which it may serve the
public. In other words, the national bank shall be the great national capi-
tal reservoir into which all income flows and from which all expenses are dis-
bursed.
The reason for this system of capital control is to accumulate, in the na-
tional treasury a great reserve of ready capital so that it will be unneces-
sary to increase the issue of currency to have funds to stabilize the currency
and the prices of goods. With this great reserve of capital in hand, the gov-
ernment can promote production and thereby promote the general welfare of the
people.
The control, especially of government enterprise capital, which this plan
places in the hands of the national bank, and thus in the hands of the govern-
ment itself, enables it to prevent wildcat investments, to control the handl-
ing of funds by government agencies and enterprises, and to prevent defalca-
tion and waste by its power to withhold appropriations from any enterprise
that is not operating according to the economic and financial principles laid
down by the financial authorities. All enterprises seeking loans must fall
into line with the government policies to secure them.
Control of capital by the national bank is the prerequisite for carrying
out the accounts cross-settlement; policy among all government agencies, mak-
ing it unnecessary to use any cash funds except 'for petty cash transactions,
thereby avoiding waste. It is necessary for the national bank to concentrate
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FBI
Sanitized Copy Approved for Release 2011/08/17: CIA-RDP80-00809A000600310659-6
 Sanitized Copy Approved for Release 2011/08/17: CIA-RDP80-00809A000600310659-6
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and control capital to make needed loan adv+aces to -~ott? government and pri-
vate enterprises. These loans are part c. the g:.e.'?'__ .e,: for increasing na-
tional production, and therefore an important part of th,^ national fiscal pol-
icy.
NORTHEAST SLOWS CURRENCY PRINTING -- Hong Kong Ta Kung Pao, 7 May 50
Mukden, 6 May (Hsin-hua) -- Necessary capital for urge-scale economic
reconstruction in the Northeast has been made available thus far in 1950 with-
out any additional issuance of currency by the Northeast Bank. This factor
and the current stabilization of prices are due to the new currency control
and bookkeeping systems adopted by the Northeast in the past year, which have
in turn speeded cash clearances and reduced expenditures in cash.
An examination of the results of the new system from its adoption by
state enterprises and government agencies until the end of 1949 reveals that
it succeeded in cutting cash transfers in transactions between the various ex-
ecutive agencies by 83.3 percent. During the same period, bank deposits dou-
bled and an increase was shown in the issuance of bonds. This kept prices for
the 1949 period from rising over 80 percent, and greatly facilitated economic
reconstruction.
In the first quarter of 1950, since cash and credit operations have been
centralized under the Northeast Bank, payments in cash have been reduced even
further. By the end of February 1950, treasury deposits had increased 3.5
times over the amount recorded in December 1949.
PRICES DROP IN CENTRAL AND SOUTH CHINA -- Hong Kong Wen-hui Pao, 1 May 50
Hankow, 30 April (Hsin-hua) -- Between 1 March and 14 April 1950, the
prices of salt, cotton, cotton yarn, textiles, and rice dropped, 45.62, 21.43,
11.28, 33.22, and 26.29 nercent, respectively, or an average of about 34.75 per-
cent, in the Central and South China region. The average percentage drop in comnDd-
ity prices in the major cities of tnis region during i.he same period was as
follows: Canton 41.2, Wu-Han 38.19, Nan-ch'ang 36.95, Cheng-chou 29.82, and
Ch'ang-sha 27.6.
STATE-OWNED ENTERPRISES PAY TAXES -- Canton Nan-fang Jih-pao, 25 Apr 50
Canton -- Taxes on the 61 state-owned enterprises in Canton for the first
quarter of 1950 amount to 4,031,877,856 yuan, of which 3,527,640,856 yuan had
been paid up to 19 April 1950. The five concerns which have not yet made pay-
ment are the Canton Foodstuffs Company, the Canton Branch of the Kwangtung
Transportation Company, the Hua-nan Foreign Trade Company, the Hua-nan Trans-
portation Company, and the Canton Department Store Company.
Sanitized Copy Approved for Release 2011/08/17: CIA-RDP80-00809A000600310659-6