893.515/367: Telegram
The Consul General at Shanghai (Cunningham) to the Secretary of State
[Received December 19—7:50 a.m.]
596. For Hornbeck and Johnson40 from Arthur Young.
“Unless way found to maintain metallic currency basis there is grave danger of financial panic threatening Government stability and China’s economic structure involving heavy loss to Chinese and Americans and others having interests here. Such disturbances would impair China’s purchasing power for imports and world recovery Raising exchange to foreign silver parity, as proposed in British bank [Page 458] credit scheme to be secured upon pledged silver not to be exported for 2 years, would be no remedy unless accompanying American action to effect lower silver price since otherwise scheme would involve further deflation and probably lead to eventually losing of monetary reserves. See no desirable alternatives except (1) American Government cooperation in reducing foreign silver to say 45 cents thus checking silver drain and restoring confidence or (2) constructive external cooperation for currency reform such as American credit possibly against deferred delivery of silver or through Export-Import Bank or otherwise. Hope latter can be seriously considered in view of extraordinary circumstances causing crisis. Particularly important now to avoid collapse that would jeopardize promising results of Government’s efforts to consolidate internal situation.”
2. In connection with the foregoing I am reliably informed that he confirmed that propaganda is being circulated alleging the United States silver policy ruined Chinese currency and that the British banks exported Chinese silver reserves consequently only help from Japan which would offer large loan and cancel Nishihara loans41 if its assistance sought and further that Japan acted in Manchuria following paper money regime and that paper regime here would bring like consequences.