893.5151/928: Telegram

The Chargé in China ( Atcheson ) to the Secretary of State

879. TF–128. From Adler73 to Secretary of Treasury74 only. Re my TF–126, of June l.75 Saw Dr. Kung76 yesterday when he again reviewed status of Stabilization Board. He indicated that in view of the change in circumstances since the 1941 Stabilization Agreement was negotiated77 and particularly in view of the fact that the closer relations between China and the United States since that time has rendered the 1941 Agreement out of date, and is wondering whether the time had not come to reconsider the 1941 Agreement. He therefore asked me to sound you out informally as to whether you would prefer:

To have the 1941 Agreement terminated and a new agreement negotiated.
To have the 1941 Agreement revised.

In his conversation with me, Dr. Kung appeared to be very confident of his ability to negotiate a new agreement more favorable to China. I understand that he showed the same confidence when he discussed the matter with his advisors from the Ministry of Finance and the Chinese members of the Stabilization Board who all favored the renewal or at most the revision of the existing agreement. I am reliably informed that Dr. Kung has frequently asserted that the existing agreement was not a good one and has particularly objected to the first sentence of paragraph 9 of the agreement according to which you can terminate the agreement unilaterally at 30 days’ notice. While he himself has on several occasions mentioned that he wished to retain foreign representatives on the Board, in more nationalistic circles, their presence on the Board is considered a derogation of Chinese sovereignty. Dr. Kung informed me yesterday that if negotiations for a new agreement are initiated, China will ask for terms of [Page 458] repayment identical with or similar to those of the Lend-Lease arrangements.78
There is reason to believe that Dr. Kung is partly actuated by personal motives in his desire to negotiate a new agreement. Apparently Dr. T. V. Soong79 recommended that the 1941 Agreement be renewed, but Dr. Kung wishes to demonstrate that he can obtain a better agreement than could Dr. T. V. Soong, and one which moreover will be free from any of the “stigmas” of the unequal treaties. Another possible factor is the desire to find a job for T. L. Soong80 who has just been appointed a member of the Chinese Legation [delegation] to the preliminary discussion [of] international monetary cooperation. T. L. Soong was formerly manager of the Southwestern Transportation Company which monopolized traffic on the Burma Road. If such a job were given him, he would presumably replace K. P. Chen as chairman.
While your reaction to Dr. Kung’s question will of course depend on broader considerations of policy, I feel it is my duty to report the impression based on observations at this end that it is to China’s as well as to American interest that the 1941 Agreement should be preserved in essentially its present form. [Adler.]
  1. Solomon Adler, Treasury Department economic adviser to the United States member of the Chinese Stabilization Board, September 1941–February 1943: United States member of the Chinese Stabilization Board, February 1943 to March 1944.
  2. Henry Morgenthau, Jr.
  3. Telegram No. 826, p. 548.
  4. Chinese Minister of Finance.
  5. See Foreign Relations, 1941, vol. v, pp. 590 ff.
  6. For correspondence concerning Lend-Lease agreement of June 2, 1942, see Foreign Relations, 1942, China, pp. 566 ff.
  7. Chinese Minister for Foreign Affairs since December 1941.
  8. Brother of T. V. Soong.