893.5151/941a: Telegram

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

882. Your 1031, June 26, 6 p.m., 1055, June 29, 5 p.m., and 1034 [1013], June 15 [24], 3 p.m. For Adler from the Secretary of the Treasury. For your confidential information only.

Part I. Reference TF–135 and TF–136.

[Page 462]
On June 29 Dr. Kuo Ping-wen and Mr. Hsi Te-mou approached the Treasury with regard to the revision of the 1941 Agreement. They indicated to the Treasury that they had been informed by Dr. Kung that Dr. Kung wished to place the Agreement on a Lend-Lease basis and indicated that this probably meant advancing funds to China on a Lend-Lease basis. They were informed that the Treasury could not use any part of the U. S. Stabilization Fund in this manner.
On July 6 Dr. Kuo Ping-wen and Mr. Hsi Te-mou again called at the Treasury to say that they had now been informed by Dr. Kung that Dr. Kung wished the 1941 Agreement to be revised in accordance with the spirit and principles of Lend-Lease. They indicated that this probably meant that Dr. Kung wished to revise such provisions in the Agreement which the Chinese felt were not in accord with the spirit of complete equality such as the provision of Paragraph 9 of the Agreement which provides that the Secretary can unilaterally terminate the Agreement at 30 days’ notice. Dr. Kuo and Mr. Hsi also indicated that Dr. Kung’s reference to spirit of Lend-Lease might include objection to the present provision in the Agreement for payment of interest. The Treasury indicated to them that the funds provided under a stabilization agreement could not be advanced on the same basis as Lend-Lease aid but that the Treasury would be willing to consider revisions in the Agreement which Dr. Kung might wish to suggest which are compatible with our stabilization operations.
It is suggested that you discuss informally with Dr. Kung the matter of the 1941 Agreement to make sure that he fully understands Treasury’s position.

Part II. Reference your TF–134,85 Part 2.

Reference is made to request made to you by Dr. Kung to sound out Treasury as to feasibility of selling $200 million of gold to be transported to China for sale to the public. For your information the Treasury is probably prepared to consent in principle to China’s request but the details have not as yet been worked out. We will inform you as soon as a decision has been made.
Among the various questions which have been raised here with regard to the sale of gold to China are:
How can the gold be used to have the greatest possible anti-inflationary effects? Will it be sold to banks or only to bullion dealers or only to the public, etc.?
Can measures be taken which will prevent part of the gold from falling into Japanese hands?
Should the gold be minted into coins or should the gold be milled into engraved bars denominated in ounces because of the difficulties in giving the coins any fixed monetary value? In this connection no legal difficulties are foreseen in minting in the United States Chinese coins for China. The suggestion has been made that there could be stamped on the coins or the bars some indication that the gold coins or bars were part of American financial aid to China.
Any suggestions which you may have regarding the above problems or any other aspect of the matter will, of course, be welcomed.
For your information there is given herewith some of the background in Washington to the Chinese request. When in Washington, Madame Chiang Kai-shek raised with Secretary Morgenthau the possibility of China’s purchasing very large amounts of gold from the United States to be imported into China for sale to the public as a means of helping to check inflation. The Secretary indicated to her that the Treasury was willing to give the matter maximum consideration. As a result of further discussions, in which Dr. Kuo and Mr. Hsi represented the Government of China, the Treasury is probably prepared to acquiesce in principle to the Chinese request. The details, however, have not as yet been worked out and no definitive decision has been made.86 [Morgenthau.]
  1. Telegram No. 1013, June 24, 3 p.m., p. 459.
  2. For correspondence, see pp. 401 ff.