893.51/7264: Telegram
The Ambassador in China (Gauss) to the Secretary of State
[Received August 11—10:46 a.m.]
337. From Fox to Secretary of the Treasury.
The following order was received by Board yesterday.
“Ministry of Finance, Secret order to the Currency Stabilization Board. August 6, 1941.
The objective of the setting up of the Currency Stabilization Board is to consolidate the foreign exchange value of the fapi for the purpose of maintaining the smooth progress of our trade with friendly nations. In view of the importance of this task, the Board must prepare careful plans in advance and then faithfully put them in practice. The following principles are therefore formulated for the Board’s guidance in working out detailed plans:
1. The maintenance of public confidence in fapi is a most important concern at present and the stability of its foreign exchange value as well as the question of lowering prices are both related to this task, hence the Board should work out detailed plans to develop the potentialities of the stabilization fund;
2. Since in the past the system of governmental allotment of exchange was not used in the operation of the stabilization fund, the [Page 699] manager of the fund was not able to prevent both the enemy and the speculators from getting hold of China’s exchange resources and stop the flight of capital; hence the fluctuations in the exchange market were often great and serious consequences followed.
Attention therefore must now be directed to the objective of preventing flight of capital and making it impossible for the enemy and speculators to get hold of our exchange resources so that the resources of the stabilization fund will not be squandered but will be effectively used.
(3) In cases when legitimate businessmen, for proper use, request to buy foreign exchange, the request should be carefully considered so that such demand can be promptly supplied and legitimate business can go on efficiently without delay.
The Board should work out detailed concrete measures on the basis of the above three principles and submit them to the Ministry for authorization. It is hoped that this order will be carried out and the results reported to the Ministry. The Ministry of Finance (signed) Kung Hsiang Hsi.”
After needs of principles are now furnished the Board and after freezing, reference is still to preventing flight of capital and checking inroads by speculators. Latter subject favored topic of Minister. Board in last paragraph directed to work out detailed plan but I understand that organizational procedure is being formulated in Ministry and is to be placed before Board Monday. Apparently Board is merely to be rubber stamp Ministry.
Hall-Patch, following third telegram from the British Ambassador and orders from Home Office, is coming to Chungking Saturday for a few days. Board will organize officially immediately thereafter.60 [Fox.]
- In telegram No. 354, August 18, 11 a.m., Dr. Fox reported that the Board was officially organized on August 13 (893.51/7269). He continued to communicate through the Department with the Secretary of the Treasury, but both his operational reports and Treasury instructions to him are generally not printed.↩