893.515/1236
Memorandum by the Adviser on International Economic Affairs (Feis)
This morning, after the termination of the meeting of the Brazilian Minister of Finance, the Secretary of the Treasury met with the Chinese Minister of Finance and the Chinese Ambassador. He had invited me to be present.
The occasion of the meeting was to give the Treasury reply to various proposals that had been made by the Chinese Minister of Finance in connection with the silver now held by the Chinese Government in the United States.
Mr. Morgenthau stated that he was prepared to suggest a definite arrangement of which the main elements were:
- (1)
- The United States would purchase the 62,000,000 ounces of silver now held by the Chinese Government in this country at 45 cents per ounce.
- (2)
- Payment will be made in gold at $35.00 per ounce (plus one quarter of one percent). This gold is to be held in earmark at the Federal Reserve Bank of New York and is to be used only for the purpose of stabilizing the yuan.
- (3)
- The American Government will, if requested by the Chinese, make short term advances to the Chinese Government up to $50,000,000, for the purpose of stabilizing the yuan at a rate of one-half percent above the rediscount rate of the Federal Reserve Bank of New York, and safeguarded by the collateral (the above-mentioned gold deposit).
The Chinese Minister of Finance indicated he thought this arrangement a satisfactory one. It was agreed that his assistants should continue to discuss some of its main details with the Treasury technicians this morning. Final reply will be given tonight and if no [Page 611] new questions are raised, a joint communiqué will be prepared for prompt issuance.
The meeting closed with an expression of warm sentiment.
The communiqué will not give details of the above transaction.