Institute of Pacific Relations

Philippine Independence in a Mineral-Conscious WorldAuthor(s): Catherine PorterSource: Far Eastern Survey, Vol. 8, No. 22 (Nov. 8, 1939), pp. 255-261Published by: Institute of Pacific RelationsStable URL: http://www.jstor.org/stable/3022943 .

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FAR EASTERN SURVEY

FORTNIGHTLY RESEARCH SERVICE

Vol. VIII ? No. 22 Russell G. Shiman, editor November 8, 1939

American Council Institute of Pacific Relations

129 East 52nd Street New York

Annual Sabscription, $2.50 Single Copies, 25 cents

CONTENTS

Philippine Independence in a Mineral-Conscious

World.255

Europe's War Helps Chinese Dollar.261

Dutch Activity in New Guinea Intensified . . . 262

North China Floods Bring Large Losses . . . 264

Soviets Hope for Rubber Self-Sufficiency by 1942 . 265

PHILIPPINE INDEPENDENCE IN A MINERAL-CONSCIOUS WORLD

Catherine Porter

The Philippine problem is a hardy perennial. Year

after year, snowed under by a seasonal pile of

legislation which promises to bury it forever, it still

blossoms forth with new life. The Independence Act

was meant to settle the question of

Independence independence: July 4, 1946, is the date

Question set for the emergence of a new inde-

Still Alive pendent republic in the Pacific. But

subsequent discussions, amendments

affecting the economic provisions of the original Act, and legislation regarding sugar quotas and excise taxes, have tended to keep alive the political issues as well.

The latest amendment to the Tydings-McDuffie Act,

passed by the United States Congress last summer and

signed by President Roosevelt on August 7, has now

provided among other things for an economic confer?

ence between representatives of the United States and

Commonwealth Governments not later than 1944. In

the intervening years it may be expected that groups will emerge which will endeavor to have the whole

matter of political relations between the two countries

reopened. Quite obviously the retentionists in this country

have been only lukewarm and poorly organized com?

pared with the strong sugar and farm groups who were

lobbying for the protection of their products from

Philippine competition for some years before the Inde-

pendence Act was finally passed by Congress. Inde-

pendence legislation in the United States met with sur-

prisingly little opposition in 1934. Among Filipinos, the growth of retentionist sentiment has naturally been slow and cautious, and has taken place behind the scenes. At last, however, a small number of business and political leaders have come out openly in favor of some kind of realistic re-examination as advocated by the recent American High Commissioner, Paul V. McNutt. Many of them do not look with disfavor upon some form of continuing political relationship between their country and the United States. The American business group in the Philippines is organizing to make

direct appeals for further economic concessions, with some form of retention of American authority and pro? tection implicit in many of their arguments.

Now, moreover, a changing world scene has brought to the fore a new argument in favor of retention of

the Philippines: protection of the America American flag for valuable mineral de- Becomes posits only recently discovered or ex- Mineral- ploited, some of which are of strategic Conscious value to the United States. Five years

ago the infant gold-mining industry was attracting much attention, and the existence of

? 255

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256 Philippine Independence in a Mineral-Conscious World November 8

other valuable minerals in the islands was known, even

though their exploitation had barely been begun. These

facts, however, played little part in congressional dis- cussions in 1934, in a comparatively peaceful world. In 1937, when the Joint Preparatory Committee was

conducting hearings in Manila, war had come to the mainland of Asia, but its import was not strong enough to direct attention then to the strategic importance of

Philippine minerals. By the time war broke out in

Europe, the American public had become a little more

mineral-conscious, and there is every indication that it will become increasingly so as the economic conflict broadens and lengthens.

Many official and private studies have appeared in the course of the last few years, taking stock of American resources of raw materials. Naturally great emphasis has been given to minerals because of the

importance of the steel industry to the country's econ?

omy in peace time and to the country's security in time of war. Rich and resourceful as the United States is known to be, it does lack certain raw materials.

According to reports of the U. S. Army and Navy Muni? tions Board, it appears that this country must depend partly or entirely on sources outside the continental limits of the United States for the following minerals, deemed essential to national defense: aluminum, anti?

mony, chromium, manganese, mica, mercury, nickel, tin and tungsten.

Governmental concern with the problem of assuring supplies of these strategic minerals is evidenced in the

comprehensive studies of the U. S.

Comprehen- Army and Navy Munitions Board and sive Studies others of a similar nature; the pro- Appear gram now under way to build up stock

piles in the United States; investiga- tions of domestic mineral resources by engineering parties under the Department of the Interior; and

monthly canvasses of production, consumption and stocks by the Bureau of Mines. It is now common

knowledge that the United States is dependent for some of these supplies upon areas on the other side of the Atlantic and the Pacific. Danger in transporting such cargoes is already a reality. The possibility that some of the minerals will be reserved by belligerents for their own use or that of their allies narrows still further the resources upon which the United States

may rely. Therefore more attention is being turned to the mineralized areas that now lie under the stars and

stripes?and prominent among these is the Philippine Commonwealth.

A survey of the Philippines' mineral wealth reveals that the mining industry of the country is chiefly concentrated in gold production; that iron, chromite, manganese and copper production has advanced rap? idly within recent years; and that other minerals are known to occur in various parts of the islands, among

them asbestos, molybdenum, lead, platinum, zinc, coal, petroleum, asphalt, gypsum, salt, sulphur, and clay.

If we pass over for the moment the gold-mining in?

dustry?and gold is after all in a somewhat different

category?we discover that there is Distance almost no local demand for the base a Factor metals which are being produced now

in commercial quantities. Therefore their development depends almost entirely on foreign markets. What are those markets? Among the Com- monwealth's neighbors, only one has become highly in-

dustrialized?Japan, which is rated among the "have- not" powers and is therefore an important potential consumer of Philippine minerals. The great distance from the United States mainland, and from industrial- ized Europe, indicates that Philippine minerals must be rare, of unusually high grade, or attractively priced, to compete in world markets with the products of

Africa, Soviet Russia, the Americas, or other parts of Southeastern Asia.

Trade returns indicate that the only two customers

taking any important share of the product of Philip? pine mines today are the United States and Japan. Therefore the question resolves itself into two parts: How important are those products to the United States, from the point of view of industrial development and the exigencies of war? How important are they to

Japan? Finally, how do these two factors weight the scales in favor of a reconsideration of the whole inde-

pendence question? Limiting our study to strategic minerals, we see that

only two of the products of Philippine mines at present are of strategic value to the United

Manganese States, chromium and manganese. They Possibilities are both practically indispensable to

the steel industry, and domestic sup? plies of neither one are adequate. Bids for both have been requested in the present $100,000,000 program to build up stocks in the United States. The demand for

manganese upped considerably a few years ago, Ameri? can imports rising from 383,500 long tons in 1935 to

911,919 tons in 1937. In 1938, however, there was a

sharp drop in imports because of the large accumulated stocks and a lowered demand from a slackening steel

industry. The import amounted to 483,588 tons; and of the apparent consumption of 218,000 tons, only 6% came from domestic sources. The bulk of imports has been coming from the Soviet Union, principal world

producer, and from the Gold Coast; in 1938 Cuba moved into second place, furnishing over one quarter of the imports; the Gold Coast supplied slightly less than Cuba, and Brazil and British India receded to

poor fourth and fifth places. Of particular interest in the bidding opened on

October 19 was the offer by the Soviet Union to supply 196,000 tons of varying grades of manganese to the

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1939 Philippine Independence in a Mineral-Conscious World 257

United States Government. This is somewhat signifi? cant?for shipments of manganese to the United States from the U.S.S.R. had practically stopped even before the outbreak of war in Europe. The risk of transporta? tion is evidenced in the provision that the buyer is to

carry war-risk insurance and that the seller is not to be

responsible for delay due to war or other causes beyond its control. Similar conditions appeared in some of the South African bids. Only Cuba and Brazil, among im?

portant suppliers, are favorably located to assure rea-

sonably safe shipments of cargoes as long as submarine and naval operations in the Atlantic continue. The

rapid development of Cuban manganese is considered of importance to the United States steel industry, in view of the great distances over which the bulk of

imports has been transported in the past. One Cuban- American corporation offered 25,000 tons in the first

bidding. Under the present national program, encouragement

is to be given to the development of domestic ores, which are of lower grade than those

U. S. imported. Recent purchases by the Production Navy Department allowed a differen- Fostered tial of 25% in price to domestic man?

ganese producers as against foreign competitors?for in the months before the outbreak of the European war, world prices for manganese were almost at "dumping" levels, a situation which would

hardly prompt the exploitation of low-grade domestic ores. The price has doubled since then; this, together with the governmental program, may help to improve considerably the position of domestic mines. The opin? ion has even been expressed that the United States

could, under stress, get along without imports, thanks to new processes of exploiting low-grade manganese, and the October 19th bidding from domestic sources

strengthens the opinion. In view of the prominence given to manganese in the

acquisition plans of the United States Government, the

Philippines as a potential source is under definite

handicaps. Although manganese is known to occur in

many parts of the Philippines, no reliable estimate of

deposits has been made, and the small workings at

present give no promise of great development. Most of the ore, too, is of medium grade, the deposits require selective mining, and some kind of beneficiation would be necessary to increase the grade. Transportation of these ores across the Pacific presents the added prob? lem of very high freight rates, which will doubtless increase. Rates have already been high enough to oper? ate in favor of shipment of the ore to Japan in the last two years. The advantage heretofore enjoyed by Philip? pine manganese in the American market is not enough to offset the other disadvantages.

In 1935, the shipment of 500 tons of manganese ore

to the United States represented the major Philippine production, and an even smaller

Philippine amount was recorded for 1936. In 1937

Shipments some 12,000 tons were mined, and last

Rising year the output more than quadrupled Rapidly ?but the latter figure still represents

less than one percent of world produc? tion. It is of some significance that Japan took three fourths of the 1937 export and practically all in 1938.

Clearly, the Philippines is not yet in a position to

supply an important share of American manganese imports, unless war pressures and prices operate to render the mining of low-grade ores more remunerative than it has been in the past.

Chromium also ranks high in the list of strategic minerals. Though the world's leading consumer of

chromium, the United States secured from domestic mines only some 2,300 long tons in 1937, and imported 553,916 tons. Demand fell in 1938. Domestic mines

produced only 812 tons, while imports totalled 352,085 tons. Almost half of this came from Southern Rhodesia and the Union of South Africa (the former taking first

place in world production in 1937). The Philippines moved up in the list, sending 22%; Cuba supplied 11% ; and smaller amounts came from New Caledonia, Turkey and Greece. The Soviet Union is an important producer, but has exported little in recent years because of its own demands. The United States is taking all of the chromium output of Cuba, most of the Philippine production, and three fourths of the New Caledonian

production. In 1938 it took about 45% of the combined

output of Southern Rhodesia and the Union of South

Africa, and about 10% of Turkey's. It is not beyond the realm of possibility that an

expanding war zone will in time impede the movement of chromium across the oceans to the

Chromium United States. In that case, Cuba would in the become the only near, but an entirely Spotlight inadequate source of supply, for the

ores are low-grade and used princi- pally for refractories. Production in Canada, which is now comparatively insignificant, might be speeded up, but here again some of the newly developing properties yield a low-grade ore. The enormous African reserves lie on the other side of an ocean which is already the scene of war activities. The high-grade ores of New Caledonia and the great potential reserves of the

Philippine Commonwealth lie across the Pacific. Because of their extent and nature, Philippine

chromium deposits are of significance to the United States. Rapid development of chromite production in the Philippines has taken place in the last four years, as was pointed out in our report last March, "Philip? pine Chromite Now a Factor in World Market." Ship? ments of the ore were first made in 1935?1,271 long tons; and reached a total of 65,847 tons in 1938, some

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258 Philippine Independence in a Mineral-Conscious World November 8

4,000 tons below 1937 production. Most of the export goes to the United States, but small amounts are find-

ing their way to Japan and to Europe. Exports in the first six months of 1939 were running far below those in 1938, amounting to less than 30,000 tons at the end of June, but it is possible that the outbreak of the

European war and the United States' program for ac-

cumulating stocks may result in increased exports of chromium ore during the remainder of the year. Con- solidated Mines some time ago placed the Masinloc

reserves, the largest known deposit of chrome in the

world, at the disposal of the American Government in the event of a national crisis requiring supplies from American sources. The relatively low chromic oxide content is offset by the size and location of the deposit, which favor profitable exploitation.

Philippine deposits at present are estimated to con? tain well over lOyi million tons; but the fact cannot

be entirely overlooked that many of American the new chromite discoveries in the

FlagNo Philippines are located far enough in Guarantee the interior of Luzon to present trans?

portation difficulties which a few months ago were considered almost insurmountable in view of the low price of ore f.o.b. Manila and the high freight rates on the long Pacific haul. Also, not even the presence of the American flag in the Common? wealth for the next six years can be an absolute guar? antee of safe transport of goods across the Pacific.

From the record it would appear, then, that chrom? ium is the only strategic Philippine ore of sufficient known value to attract American interest. That fact does not eliminate the possibility that further explora- tions may disclose other deposits of vital importance to the United States. But for present demands, which

may almost be classed as emergency, the alluring vision of mineral wealth in the Philippines becomes somewhat dimmed viewed across the vast expanse of the Pacific ocean. Stock piles under the flag are admittedly not to be sneezed at, but their strategic value lessens in pro? portion to their distance from the home base. The record of the next few years will demonstrate, more

forcibly than any forecasts can, the relative importance of Philippine minerals to United States economy.

That brings us to the other, and what may be con? sidered the more important, aspect of the matter. Is it

wise to "abandon" a rich almost un-

Foreign opened country lying at the very door Markets of one of the "have-not" powers ? The Limited implication of this question is that,

once the United States has left the

Philippines, Japan will move in in one guise or an? other. The political and military angles of the question are beyond the scope of this article. It is plain that

Philippine base-metal mining does now and will for some years depend upon foreign markets. How impor-

tant Japan may be in the scheme is suggested by pres? ent trends. For the only other ores now being mined in commercial quantities are iron and copper, neither of which the United States wants, both of which Japan sorely needs.

The production of iron and copper in the Philippines has brought Japan into the market as an important buyer, especially since the outbreak of hostilities in China. The islands' iron deposits might still be lying almost undisturbed if it were not for the proximity of a neighbor in dire need of the ore. Philippine Iron

Mines, Inc. started with a small output in 1934, and

yearly increases have been notable. Two other iron mines contributed to the record export of 910,952 metric tons in 1938?a remarkable showing compared with the 7,000 tons exported in 1934. Practically all of this export goes to Japan. Philippine Iron Mines contracted with a Japanese company in Tokyo to sell and deliver 770,000 tons of ore this year. Agusan Mines has started shipping iron ore to Japan this year. It

reportedly has a fifteen-year contract with Japan, to furnish a minimum of 200,000 tons annually. Iron

exports from the Philippines in the early part of 1939 had increased 50% compared with 1938. Development has not yet begun of the extensive reserves at Surigao, considered one of the largest ore bodies in the world, estimated conservatively at 500 million tons. The

peculiar quality of the ore presents unusual smelting difficulties, and a lack of interest on the part of Japan accounts in part for the Commonwealth Government's hesitation in pushing development at this time. With iron consumption in the Philippines estimated at only 60,000 tons, the local market offers little incentive to

developing a deposit as extensive as Surigao. Given continuing ability to pay for imports, Japan's

need for iron ore is so urgent as to encourage develop? ment throughout the Far East. The

Japan war with China has proved a severe

Already drain on Japan's mineral supplies? Taking including her gold reserve?and efforts Iron are continuing unabated to develop

further domestic resources and to in? crease output in areas where Japanese interests pre- dominate. Domestic production of iron ore increased from 321,000 metric tons in 1933 to 754,000 tons in

1936, and may have reached a higher figure in the last two years. Imports in 1937 were Sl/2 million tons, of which \l/2 million came from Korea and a larger amount from the iron mines of British Malaya, financed by Japanese capital and operated by Japanese management. Imports from the Philippines have al? ready exceeded domestic production and are pushing close to Malayan imports.

Other efforts on the part of Japan to develop sources of iron ore have already been described in these pages (see appended list of related articles). They include

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1939 Philippine Independence in a Mineral-Conscious World 259

operations in Manchuria and North and Central China.

Hopes of developing iron ore in Northern Australia were cut short by the Australian Government's action of July 1938 prohibiting further exploitation of iron reserves by Japan, and banning ore exports altogether. This was a serious blow to Japanese plans for Koolan

Island, in which some millions of yen had been in?

vested, with the expectation that from 1939 onwards a

million tons of ore annually would be recovered.

Philippine copper, chiefly a by-product of gold min?

ing, has been of importance only in the last two years, again largely as a result of Japanese

Copper buying. In 1938 Japan took nearly all Also Going of the export of some 24,000 tons. North Japan is an important copper producer,

but her requirements have been stepped up considerably with the rapid development of her

heavy industries under the pressure of war activities.

Consumption in Japan was estimated at 190,000 tons in 1937, and at 240,000 tons in 1938, while domestic sources in the two years supplied only about 87,600 and 90,000 tons respectively. Although copper is known to be present in the Philippines in commercial quanti? ties, unless it can command a price high enough to stimulate production on a larger scale, the country cannot supply a major part of Japan's needs.

Large purchases of Philippine manganese by Japan in the last two years are the direct result of the Sino-

Japanese war, which has interrupted the normal import of over 60,000 tons annually from China. India has been Japan's chief source of supply, and now Philip? pine manganese bids fair to take the place of the China product, temporarily at least. However, exports of manganese from the Philippines to Japan have fallen off in 1939, partly because of the Japanese Govern- ment's restrictions on foreign exchange.

Base-metal mining in the Philippines owes much to

Japanese investment at the source. Although it is diffi? cult to secure actual data on this point,

Japanese there is reason to believe that not in-

Investing considerable Japanese loans have been at Source made to individuals or companies asso-

ciated with mining exploitation, these loans conditioned on the offering of the ore to Japanese buyers in the first instance. One of the manganese producers, Philippine-Nippon Mining Co., is a Filipino- Japanese corporation, and the manager is a Japanese; and at least one copper mine represents some direct investment of Japanese capital. Such direct investments are possible under the Philippine mining law, which limits ownership of mines to Philippine or American

citizens, but extends such ownership to corporations of which 40% of the stock ownership may be in the hands of aliens.

This legal provision draws attention to the succes- sive steps that are being taken by the Commonwealth

Government to nationalize base-metal resources. A new

proclamation last spring added, to the comparatively small reservations already held for government ex?

ploitation, almost the entire province of Surigao in northeastern Mindanao. This proclamation bars pri? vate development of all iron, coal, or oil deposits that

may exist in that area. Somewhat earlier all actually known and potential oil lands in the archipelago were reserved for development by the government.

The reasons for this governmental action are plain, in so far as coal and oil are concerned. Neither of these

two has been able to attract private Petroleum capital because of the great uncertainty Still in with regard to their occurrence in

Experimental commercial quantities. Yet for the

Stage country's development both are of vital

importance. Although coal production has increased again in recent years, it is still less than

30,000 tons, while consumption ranges from 250,000 to

400,000 tons annually. The greater part of the imports come from Japan, with lesser amounts coming from

Australia, French Indo-China, and British East Indies. Petroleum production is still, after years of explora- tion, in the experimental stage?and the country has to import some 500,000 tons yearly, chiefly from the United States.

Spasmodic bursts of interest in oil development have occurred during the last forty years, but none of the ventures has met with success. Since the inauguration of the Commonwealth Government, more consistent attention has been given the matter, and finally in

August 1938 a call for bids for exploration, exploita? tion and development of petroleum deposits was re-

quested. Only one bid was submitted, and this was

rejected in February of this year, Commonwealth offi- cials and experts declaring that they were not satisfied that the terms of the bid provided for the earliest

practicable determination of whether oil existed in the

Philippines in commercial quantities. The National Development Company was at once

charged with the task of prospecting for oil, with the

express view of determining within a Local Needs year the actual possibilities of petrol- First eum development. The National As?

sembly in Manila has appropriated $100,000 for initial explorations and for the organiza? tion of an office charged with promoting the industry. Work is at present going on in Leyte and Cebu, and the Bondoc peninsula will be the next area of survey. Studies are also being made in Panay, Tarlac and Cotabato.

If the explorations of the National Development Company should disclose extensive oil resources?an

eventuality about which there is not too great optimism expressed?the Philippines would take on an added attraction for Japan. Oil, however, is one mineral for

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260 Philippine Independence in a Mineral-Conscious World November 8

which the Philippines would have a large local demand, which is not true of the other minerals considered above. Japan's search for oil throughout her own islands parallels that of the Commonwealth Govern?

ment, and results have been discouraging. One inter-

esting thesis about Japan's seizure of the Spratly Islands is that there is great likelihood of oil being discovered in that general area, at not too great depth under water to prevent successful exploitation.

Though our discussion has been limited to strategic minerals, the wealth of Philippine gold mines should

by no means be omitted. For the great- Gold est bid for mining fame has been made

Leading by gold production, which like that of Mineral the minerals considered above is a phe-

nomenon of recent years. In 1938, gold production was valued at $31,614,275, as compared with 1929 when it was $3,320,300. (By way of com?

parison, the combined value of all base-metal mining in 1938 was $2,500,000, and exports of base metals were estimated at nearly $4,000,000.) While the amount of gold mined has increased over five times, to 903,265 fine ounces, the value has increased nearly ten times. This is largely because of the United States Gold Reserve Act of 1934, by which the value of gold was fixed at $35.00 per fine troy ounce. In 1929 the value was $20.67. Production of gold was still on the upgrade in 1939, with a value of nearly $20 million in the first six months, this total lacking the figures for eight smaller mines. A large share of the investment in this field is American. Silver, by-product of gold, reached a

high of 1,167,000 fine ounces in 1938. A most encourag- ing comment by the head of the Department of Mining Engineering at the University of the Philippines is to the effect that the largest operating mines have not yet been able to determine their exhaustion point, which indicates for them a healthy lease on life.

Since gold has always found a ready market, in contrast to some of the other mineral products of the

islands, it may well be considered the most important factor in the Philippine mining industry today. Gold is now going to the United States and thus is in part responsible for the credit balance in favor of the Com? monwealth. To any country needing exchange in world

markets, hills full of credit are fully as attractive as mines full of industrial metals.

The future of mining in the Philippines cannot be

entirely dismissed with a brief survey such as precedes. The industry is too young and uncharted to furnish a basis for far-reaching policies on the part of any inter- ested party. It is generally believed that more extensive and careful surveys are likely to turn up further valu? able deposits. One has only to glance at a Coast and Geodetic Survey map of the Philippines to appreciate the extent of "unexplored" territory?eight tracts in the interior of Mindanao alone?that still awaits the anal-

ysis of the engineer and the pick of the prospector. Potentialities should not and will not be overlooked.

Any consideration of the area is inadequate, however, which does not take into account the relation of its mineral wealth to that of neighboring areas and the rest of the world.

Again it is unrealistic to measure the importance of

Philippine minerals on the basis of their present export value. Base metals formed only 3% of

Base Metals total exports in 1938; less than 1% of Low in trade with the United States, but 40% Export Rank of trade with Japan. However, Japan

took only (>y2% of the country's total

exports of all classes in 1938, while the United States took well over three quarters. Whether minerals will ever take the place of the big agricultural crops such as sugar, abaca, copra, and tobacco, is highly doubtful in a country as essentially agricultural as the Philip? pines. Therefore they must be considered in absolute terms of their strategic value to present and potential buyers.

By virtue of its present economic and political rela-

tionship with the Commonwealth, the United States is in a position to buy whatever it wants. Japan, by virtue of its geographical position and mineral poverty, is a

logical market for the ores which the United States does not take. There is no reason to believe that the

present trend will alter appreciably after independence, so far as these exports are concerned.

Doubtless the root of American misapprehension with regard to Philippine independence is the fear that,

quite apart from the normal processes Japan as a of trade, Japan's interest in the Philip- Bogey pines may take on more aggressive or

even violent forms. To a certain extent, these observers are overlooking steps which the Com? monwealth Government has taken to safeguard nation? al rights in natural resources. They are also overlook?

ing the serious efforts which the Philippines is making to provide adequate defense of its territories. They will not be allowed, however, to overlook their own respon- sibility in whatever decisions are to be made between now and 1946. The natural orientation of the Philip? pine market towards Japan after that date is a fore-

gone conclusion in many quarters. If this prospect is

displeasing to some Americans, they will have many reminders in the next few years that the alternative is for the United States to make such economic conces? sions as will enable Philippine-American trade to con? tinue in some measure along its present lines.

If American interest in Philippine minerals is to in? fluence possible re-examination of the whole Philippine question, there will be a demand for a clearer definition of what that interest is: a dog-in-the-manger attitude about some products which it has never taken and may never want, but which might have some little embargo

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1939 Europe9s War Helps Chinese Dollar 261

value in the future; or a straightforward desire to re? serve certain other deposits for United States use. In terms such as these it may be possible to determine how important minerals are as part of the American stake in the Philippines.

PRINCIPAL SOURCES: Minerals Yearbook, Washington; Bulletin of Philippine Sta? tistics, Manila; Philippine Mining Year Book, 1939, Manila; Monthly Reports of Bureau of Customs, Manila; Monthly Summary of Foreign Commerce of the United States, Wash? ington ; Eugene Staley, "Raw Materials in Peace and War," New York, 1937; C. K. Leith, "The Struggle for Mineral Resources," Annals, July, 1939; Philippine and American Chamber of Commerce Journals, Manila; Herald, Manila; Sugar News, Manila; Times, New York; Herald Tribune, New York; World Telegram, New York; Journal of Com? merce, New York; unpublished mss.

RELATED ARTICLES IN PREVIOUS ISSUES: "The United States and Southeast Asia's Strategic Products," Apr. 12, 1939; "British Malaya as a Leading Source for

Japanese Iron," Mar. 15, 1939; "Philippine Chromite Now a Factor in World Market," Mar. 1, 1939; "Tayeh Iron Fields Put Under Direct Japanese Control," Feb. 15, 1939; "Japan Still Seeks Oil from Coal and Shale," Jan. 19, 1939; "Repercussions of the Australian Embargo on Iron Ore Exports," Dec 21, 1938; "New Manganese Discoveries Aug- ment Soviet Resources," Dec. 7, 1938; "Manchurian Iron and Steel Output Expanding Rapidly," Nov. 9, 1938; "United States Seeks to Remedy Manganese Insufficiency," Oct. 12, 1938; "The Play of Petroleum Forces in the Far East." Sept. 7, 1938; "The Search for Petroleum in the Philip? pines," Aug. 10, 1938; "Australia Cancels Japanese Iron Exploitation Contracts," July 13, 1938; "Philippine Indus? tries Today and Tomorrow," June 29, 1938; "Steps Towards Economic Planning in the Philippines," Apr. 6, 1938; "Iron as the 'First Fruits* of the Japanese Advance," Mar. 2, 1938; "Coal Development Encouraged in Philippines," Sept. 1, 1937; "Iron and Steel in the Far East," June 23, 1937; "Philippines Increase Iron Shipments to Japan," June 9, 1937; "An Independent Philippines and Japan," Apr. 14, 1937; "Japan Faces Pig Iron Shortage," Feb. 3, 1937; "Mineral Deficiency Versus Self-Sufliciency in Japan," Jan. 15, 1936.

EUROPE'S WAR HELPS CHINESE DOLLAR

The outbreak of war in Europe and the introduction of exchange control measures in the British and French

Empires have given the remaining "free" neutral cur? rencies of the Far East a new standing. With the

Philippine peso and the Dutch guilder stabilized, the

strength imparted to the neutral currencies became most strongly apparent in the quotations of the Chinese national dollar in Shanghai. While for a time, a 3 pence dollar seemed to be no more than a transitional stage in the depreciation of the Chinese currency (see "Cur?

rency War Involves Shanghai," Far Eastern Survey, Aug. 16, 1938), the tendency has been lately toward a much higher stabilization level, which at the time of

writing seems to be in the neighborhood of from 4J/2 to 5 pence, or 7.7 to 8.3 U. S. cents.

One factor contributing to this improvement of the Chinese national currency, the "collapse" of which seemed so near towards the end of July and during the first half of August, has been a return of Chinese flight capital from Hongkong beginning shortly after the

publication of the Soviet-German Nonaggression Pact. There are of course no definite data available concern?

ing this movement of funds, but various statements in the Shanghai press, especially those in Finance and

Commerce, would suggest that the total volume thus

repatriated may have amounted to no less than

?3,000,000, that is, more than U.S.$12,000,000. The full impact of this capital movement, equivalent to from Ch.$150 to 200 million, has not been allowed to affect the market, as the two big British banks in

Shanghai, both members of the Exchange Equalization Fund Consortium, intervened by selling Chinese dol? lars. They succeeded by this procedure in restricting the upward swing of currency quotations. Nevertheless, the improvement in the quotation of the Chinese dollar sufficed to frighten "hoarders" of foreign currency. Not

only were export bills of exchange freely offered, but

also foreign currency notes were sold. Hongkong dollar

notes, which especially before the European crisis had been hoarded in Shanghai, were offered to such an extent that a discount developed in sharp contrast to the earlier premium rate.

Our present information does not suffice to conclude if the intervention by the British banks in Shanghai could be considered as an activity of the Chinese Ex?

change Stabilization Fund. As, however, no unfavorable comment has been forthcoming from the Chinese side, the assumption seems justified that these stabilization activities have not been unwelcome to the Chinese financial authorities. Similar action by Japanese banks in Shanghai would, therefore, have fitted into the Chinese plans.

Examination of the latter assertion throws more

light on the situation. The low level of the Chinese dollar will naturally favor Shanghai's growing export business and discourage importation of foreign goods. As in every depreciation, the drastic fall in the currency implies certain self-curative elements which would be lost if any sizeable appreciation were to take place temporarily. From this point of view, the Chinese authorities may even secretly welcome a measure

against which they have protested viva voce, namely, the levy of Shanghai customs duties in terms of the new

Japanese-sponsored Hua Hsing currency, as this transi- tion to a new currency regime in the Customs Adminis? tration really amounts to an increase of China's cus? toms duties by nearly 50%. It is true that the effect of this measure has been a slight increase in the note circulation of the Hua Hsing Bank, but with a total of only H.H.$2.8 million in circulation the latter still remains fairly insignificant in comparison with the hundreds of millions of Chinese national dollars still

circulating in the Shanghai area. In addition to such temporary relief of the Chinese

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