893.515/469: Telegram
The Secretary of State to the Minister in China (Johnson)
80. Your 41, February 27, noon, from Nanking.
1. On March 1 this Department forwarded to Treasury Department [Page 559] a copy of your telegram under reference. In letter dated March 14 Treasury Department replied in part as follows:
“With reference to item (a) (see paragraph 1 of your telegram under reference) the following résumé of the transaction in question is furnished for your information:
About the middle of November, 1934, the Treasury Department, through its fiscal agent, purchased from the Chinese Government several lots of silver totalling 19,000,000 ounces for delivery during the month of January, 1935, on board United States steamer or steamers for shipment to the United States. These purchases were made because of the fact that the Chinese Government was a seller of silver at that time in large quantities, apparently because of their need for foreign currencies. The Treasury Department offered to purchase the silver at that time as a means of cooperation with the Chinese Government, which otherwise might have experienced difficulty in marketing this amount of silver in the open market. At the request of the Chinese Government, delivery and payment for this silver was subsequently postponed until February, 1935. In February a further postponement was requested by the Chinese Government and in order that they might be given an opportunity to arrange delivery with the least possible inconvenience, the Treasury Department agreed to accept delivery of 4,000,000 ounces in February, 1935; 5,000,000 ounces in March, 1935; 5,000,000 ounces in April, 1935; and 5,000,000 ounces in May, 1935. At the same time the original contracts were altered to allow for delivery of this silver either in Shanghai or London at the option of the Chinese Government. Up to the present time a total of 9,000,000 ounces has been delivered in London, which meets all the requirements of the contracts up to the last day of April, 1935. As no further deliveries of silver are called for under these contracts until the end of April, and then at the rate of only 5,000,000 ounces a month, it does not appear that the fulfillment of this contract calls for any further action at this time. However, if at the end of April the Chinese Government still desires it we will give favorable consideration to suggestion of a further delay.73
The suggestion under heading (b) (see paragraph 2 of your telegram under reference) that the American Government will ‘encourage the Chase National Bank and the National City Bank to import into Shanghai U. S. $20,000,000 where it might be used to unfreeze capital’ does not appear to be within the province of the Treasury Department and for this reason I do not think it would be proper for me to take any action on this suggestion.”
2. With regard to paragraph 3 of your telegram under reference, Department on February 26 handed to Chinese Minister this Government’s reply (see second paragraph of Department’s 64, March 5, 11 a.m.74).
3. You may communicate informally to Kung, either directly or through Peck, the substance of the foregoing and express this Government’s [Page 560] regret that it is not in position to pursue the course suggested as outlined in your telegram under reference.