The Ambassador in China (Gauss) to the Secretary of State
[Received January 9—8:04 a.m.]
29. TF–13. From Fox for the Secretary of the Treasury:
“Dr. Kung, who is convalescing from what has been variously diagnosed as typhus, typhoid, and para-typhoid, asked me this morning through Madame Kung to transmit following reply to your message of December 16 (section 4 of your 304).40 Understand that message was prepared after consultation with Generalissimo, Vice Minister of Finance, O. K. Yui, participating. Message reads:
‘Secretary Morgenthau. Deeply appreciate your message December 16th through Fox. Heartily agree with you on outcome of war. Thank you for considering preliminary proposal sent through Cochran but this no longer practical since spread of war in Pacific altering economic as well as strategic situation. For four and a half years China has been fighting war of resistance with untold sacrifices and heavy strain on her resources. Her financial and economic situation is now in precarious state. Brave soldiers at the front ill-fed and ill-clothed while livelihood of people difficult due to rising prices. Necessary keep control of prices and currency without curtailing production. If financial and economic front, already very critical, should collapse, impossible to carry on war.
Present world war developments make it imperative for democratic countries to pool their military and economic resources as their existence and survival are interdependent. Therefore, I appeal to you for a $500,000,000 political war loan. We have also approached Britain for a 100,000,000 pound loan in order to cover the total amount needed, and are awaiting their reply. Am confident if you will lead they will follow. Purpose is to replenish reserve in order to restore [Page 433]confidence in currency, restrain prices, offset diminished imports by increased production, and meet other urgent war needs. On economic grounds as well as from the standpoint of joint military front there are sound justifications for the loan but frankly my reason for approaching you is above all political. The import of such a loan is even more important than that of the Lease Lend-Bill. Timeliness is the essence of such a move in order to show China’s confidence in the allied powers is matched by equal confidence of allied powers in China in the most crucial months of emergency immediately ahead. Early announcement of loan would have immediate effect throughout Asia including Japan our common enemy as well as electrifying Chinese public opinion. Appreciation of your keen and continuing interest in China gives me confidence in sending you this telegram. H. H. Kung.’
My comment follows in a separate telegram.”41