893.515/917
The Economic Adviser (Feis) to the Secretary of State
Mr. Secretary: You will remember that the Treasury agreed to buy 50,000,000 ounces of silver from the Chinese Government.
The Treasury now informs me that no deliveries have been made to them as yet. Apparently little new silver has been turned over to the Chinese Government. What they have to sell would be primarily what was already in the possession of Chinese banks. After some days’ delay, the Chinese Government said that they would make some deliveries but asked that the American banks in Shanghai handle the actual physical transaction—taking it out of the vaults of the Bank of China and putting it on an American ship. The contract reads that payment is to be made by the American Treasury only when the silver is actually on board an American ship in Shanghai. The Treasury has refused to modify this contract.
The best conjectures as to the reasons why the Chinese authorities have tried to bring about the change of procedure are either (a) they would welcome having the American banks appear in this way in the transaction—thereby presumably disclosing indirectly the confidential purchase arrangement with the Chinese Government, or (b) they are afraid that the Japanese Government would protest if they undertook the actual physical transfer.
I venture to say that I am confident the Department agrees with the Treasury decision.