The Ambassador in China (Gauss) to the Secretary of State
[Received March 12—6:40 a.m.]
215. TF–20. For Fox care of Secretary of the Treasury from Adler.
1. Chinese board members report informally that Doctor Kung called a meeting of Chinese board members and financial and banking experts on March 9.
He said that T. V. Soong31 had recommended the following on New York bankers’ advice: (a) lowering exchange rate to 4 cents, (b) using loan to guarantee and thereby encourage new savings deposits with Chinese banks, (c) these savings deposits to be redeemable in foreign exchange for about 1, 2 and 3 years and (d) possibility of using Stabilization Board as instrumentality with respect to (b) and (c).
With respect to (a), Doctor Kung felt the reduction would be too precipitous and was more disposed to accept a 5-cent rate. He is also inclined towards using differential exchange rates in connection with proposed dollar backed issues. The whole discussion at meeting was tentative and nothing definite emerged.
2. Dr. Kung told meeting Generalissimo32 wanted to have a stock market in Chinese Government securities opened in Chungking, adding that if a stock market is developed it should if it is possible include a market in grain futures.
3. Minister of Food, head of Bank of Communications, and newly appointed [General?] Secretary of Central Bank argued strongly at meeting for unfreezing Chinese assets in the United States and for restoring free exchange market here, but Dr. Kung opposed these suggestions.
4. Your cable of March 433 just received and your proposal [goes?] to next board meeting. [Adler.]