893.515/370
The Chinese Minister of Finance (Kung) to the Chinese Minister in Washington (Sze)36
The American Government’s communication of October 12 expressed a desire to conduct its silver purchases so as to avoid disturbing China’s economy and expressed its willingness to discuss the problem involved. In this spirit and having in mind America’s traditional interest in China’s welfare and the President’s special friendship the Chinese Government frankly lays before the American Government the present difficulties resulting from the rise of silver and requests American cooperation. Notwithstanding the silver export restrictions of October 15 China is now involved in a dilemma:—If the present disparity persists there will be continued silver drain through legal and illegal export and hoarding which create fear and consequent capital flight. If however the Government endeavors to raise the exchange toward a foreign parity this would only cause further severe deflation and necessitate further heavy silver export and create again a situation similar to that before October 15. The adoption of a gold basis involves transition difficulties and risks which the Government is reluctant to take up unless supported by substantial foreign credit. Regardless of which alternative chosen as to the silver policy drain and hoarding would continue threatening metallic basis. China therefore wishes to inquire whether the American Government would cooperate by announcing it would not pay over say 45 cents per ounce except American domestic silver. If the American Government wishes to be in a position to do whatever is desired about silver without hurting China an alternative would be some form of cooperation to facilitate currency reorganization. The Chinese Government would appreciate the views of the American Government concerning the subject entirely.
- Copy handed to the Under Secretary of State by the Chinese Minister on December 10.↩