Memorandum of Conversation, by Mr. Troy L. Perkins of the Division of Far Eastern Affairs

Participants: Mr. E. M, Bernstein and Mr. I. S. Friedman of the Treasury Department
Mr. Perkins, FE

Mr. Perkins called at the Treasury on July 7 at the request of the office of Mr. White, Assistant to the Secretary of the Treasury, and talked to Mr. Bernstein and Mr. Friedman. Mr. Friedman explained that the Treasury officials wished to inform us of recent developments in financial relations with the Chinese Government.

Mr. Friedman said that as of June 30, 1943, $200,000,000 of the $500,000,000 credit to China had been withdrawn by the Chinese Government. The Chinese financial authorities, apparently at the instance of Generalissimo Chiang Kai-shek,31 have now requested that they be allowed to withdraw an additional $200,000,000 of this fund to purchase gold from the United States. It was explained that in as much as the fund is pledged to China, that country can make withdrawals for such use as may be desired. At the same time the Treasury is interested in seeing that the fund be used in furtherance of the war effort. Following consideration of China’s proposal, it has been decided in principle that the amount desired will be released to China, although technical details remain to be worked out.

Upon Mr. Perkins’ inquiry as to the practical use which the Chinese might intend to make of the gold purchase, it was explained that presumably shipment of gold to China would be handled in the same manner as shipment of bank notes. One million dollars in gold weighs one ton, consequently 200 tons of air cargo space would be required for the total shipments. It is anticipated that a free gold market in China will be established, present regulations against trading in gold having first been rescinded.

Mr. Bernstein explained that gold importations should be helpful economically, both as a psychological and as a practical financial measure; under the latter heading would be the anticipated diversion of excess Chinese funds into the purchase of gold, as well as a probable [Page 423] decrease in commodity purchases. It is hoped at the same time that the rate of bank note issue could be decreased to some extent.

Mr. Perkins thanked the two Treasury representatives for their courtesy in making this information available to us.

  1. President of the Chinese Executive Yuan (Premier).