893.51/7372: Telegram
The Ambassador in China (Gauss) to the Secretary of State
[Received December 30—3:04 p.m.]
548. General Chiang sent for me today and after reviewing briefly recent measures for military and political collaboration with America and Britain, he turned to the economic situation stating in substance as follows: Whereas intelligent Chinese do not lack confidence in final victory of the anti-Axis powers, there are the uninformed masses, the doubters and those associated with the Chinese traitors who lack such confidence. The initial Japanese successes and Japanese exploitation thereof for propaganda purposes have affected morale. He specifically mentioned the recent radio appeal made to him by the Prime Minister of Thailand for Asiatic solidarity against westerners. China can help the common cause with fighting manpower but America and Britain must help China financially in order to prevent further deterioration of the economic foundation, confidence in Chinese currency, et cetera. Such help would go far to strengthen morale and silence the doubtful and critical elements. He wants a credit of about 1 billion American dollars. He has asked the British Government through the British Ambassador to provide about half of this total or 100 million pounds, America to provide the balance or about half a billion dollars. He asked that I transmit his request to the American Government and emphasize the importance of such aid coming at this time to Chinese morale toward overcoming Japanese propaganda and in giving needed support to China’s economic structure. He said that the proposed loan would be used partially [in?] a domestic bond issue designed to curb inflation pointing out that the present currency issue is more than 13 billion paper dollars and that the budget for 1942 shows a deficit of at least 9 billion Chinese dollars.
I informed Chiang that I would of course immediately and faithfully report his request and observations to the American Government saying that I was confident that we would be disposed to give sympathetic consideration to any reasonable proposals for aid to China in her resistance to Japan. I suggested however that in considering his [Page 769] request and in approaching the Congress for necessary legislation to authorize American participation in a loan or credit to China there should be submitted a carefully prepared outline of the needs of the situation based upon the studies and recommendations of the financial experts and advisers of the Chinese Government together with an outline of the measures proposed to be undertaken to meet the situation including measures to be taken by China to help herself. I added that I was not suggesting that the terms of any proposed loan should be outlined but rather the needs of the situation and the definite measures to be taken to meet them.
The Generalissimo stated that plans for the use of the proposed loan or credit were being worked out by experts and advisers but meanwhile he desired me to make the proposal to my Government and when the loan is assured the proposals for its application can be put forward.
The British Ambassador tells me that he has been approached for [a] British loan of £100,000,000 and has referred the matter to London. He was equally without specific proposals as to the manner in which the loan if granted would be applied to the difficult Chinese economic situation; the Generalissimo considered it urgently necessary that he should be able to show to the people and the armies that the British Government had faith enough in victory to give China quickened aid.
My comments will follow.60