893.51/7676: Telegram

The Ambassador in China ( Gauss ) to the Secretary of State

260. TF–95 to Secretary Treasury from Adler. Re your 223 of February 14 [13]. Dr. Kung on hearing your message said that he appreciated the need for the maintenance of control measures and that he in no way wished to embarrass the Treasury in its enforcement of the necessary controls. He also appreciated Treasury’s willingness to accord the maximum consideration in regard to requests for funds [Page 412] for permissible transactions through specific licenses. His objectives in floating the savings certificate issue had been twofold: To sop up fapi and to make United States dollars available to Chinese merchants so that when it became possible for them to place orders for much needed machinery and raw materials in America, they would be in a position to do so, to the mutual advantage of both countries. I pointed out that in any case such orders could not be placed for some time to come and that therefore the present status of the United States dollar proceeds of the certificates would interfere with the attainment of his second objective. He replied that while he was fully aware of this he doubted whether the merchants would be; he repeated that the possibilities of making additional sales of certificates on a significant scale were remote, as Chinese had purchased them in the belief that the United States dollar proceeds would be free. Dr. Kung agrees that the Stabilization Board should be consulted by the Treasury re the release of the blocked United States dollar proceeds of the certificates and is anxious for an arrangement to be set up whereby the Board would make recommendations to the Treasury on applications from holders of certificates for release of their blocked funds when their certificates mature. [Adler.]