811.515 Silver/22
The Chinese Minister (Sze) to the Secretary of State
My Dear Mr. Secretary: I beg to enclose herewith the following cable message from Dr. H. H. Kung, Minister of Finance at Nanking, which I am requested to deliver to you: [Page 443]
China, as a leading silver standard country, considers silver has much more vital concern to it than any other country, and in view of the American silver purchase act presents to the American Government the following views supplementing previous informal communications. Since 1931 the rising of silver value in terms of foreign currency has involved severe deflation and economic losses to China and has dislocated China’s balance of payments in part at least by hampering exports. Recently the stimulation of silver prices abroad to which exchange has not fully responded, has caused serious drain of silver creating great alarm. Silver exports of this year to date are over three times greater than any previous full year. Further material silver price increase would cause very serious injury to China, possibly severe panics. Although influential American circles advocate higher silver prices the Chinese Government of course makes no assumption concerning the American policy in this regard.
China is certain that the American Government desires to avoid any action that may aggravate present conditions and therefore would appreciate an assurance that the American Government would refrain from any action that might cause a continuation of the present silver drain from China and accordingly would cooperate to prevent further rise and to maintain the stability of silver which the London agreement contemplates. Indeed from China’s viewpoint the stabilization level should be somewhat lower than the present price.
The National Government feels obliged actively to seek means of avoiding further hardships of silver fluctuations. It considers that China should not alone maintain the silver standard and is considering the gradual introduction of a gold basis currency which will necessitate the acquiring of gold. Since the American Government desires an increased proportion of silver in its monetary reserve the National Government desires also to ascertain in principle whether the American Government is willing to exchange with the Chinese Government gold for silver.
I am [etc.]