Memorandum of Conversation, by Mr. Alger Hiss, Assistant to the Adviser on Political Relations (Hornbeck)

Participants: Sir George Sansom, British Embassy;
Mr. Ballantine and Mr. Hiss.

Sir George Sansom had called on Mr. Hornbeck in connection with several matters other than the topic under reference. When Sir George raised the question of the Stabilization Board Mr. Hornbeck, who at about that time was called to the Secretary’s office, referred Sir George to Messrs. Ballantine and Hiss.

Sir George said that instructions had been received from the British Foreign Office to mention to the Department of State the view of the Foreign Office that the continuance of the Stabilization Board on a three-power basis had political aspects which the Foreign Office considered of some importance.

In the course of a general informal discussion of the status of the Stabilization Board Messrs. Ballantine and Hiss stated that in their opinion, speaking personally and not officially, the matter from a political point of view was not of very great moment. Sir George said that he did not perceive any very great political issue but that he was not sure just what the Foreign Office had in mind. Messrs. Ballantine and Hiss suggested that Sir George might wish to talk directly with Dr. White of the Treasury Department in order to be sure that he had full understanding of the Treasury’s position in the matter. Sir George replied that Sir David Waley, the British Treasury’s representative in Washington, had talked with Dr. White of [Page 475] the Treasury and said that he could do no more. Sir George indicated that he himself would be reluctant to talk the matter over with Dr. White in view of his own lack of knowledge of the details of the matter and in view of the fact that Sir David who was an expert on such matters had not accomplished anything.

Messrs. Ballantine and Hiss pointed out that so far as they knew the Treasury had at no time taken any rigid attitude with the Chinese on this matter and that the door was always open to the Chinese to suggest some new approach to the matter. It was pointed out to Sir George that the Stabilization Board is not in position at present to accomplish very much, that the American-Chinese Stabilization Agreement has expired and that the Chinese have not proposed any renewal of the agreement which seemed feasible to the Treasury Department. In the absence of any indication that the Chinese were sufficiently desirous of continuing the Board to offer to consider any revision of the agreement so as to make it more acceptable to us, it would seem that it would place us in an awkward position to express a desire to continue representation on the Board. Sir George was told that Mr. Adler continues to remain in Chungking and that we are not aware of any decision to recall him. It was also pointed out to Sir George that it may be somewhat anomalous for this Government, under the circumstances, to continue participation in an agency whose primary duty is to stabilize Chinese currency at the existing official rate of twenty to one when at the same time, as Sir George knew, this Government is expressing directly and indirectly the view that the official rate results in very considerable hardships to American official personnel in China and even interferes with the full conduct of our military effort in China.

Sir George seemed inclined to drop the matter and, in any event, it would appear that no further action is called for unless the British Embassy take some further initiative in the matter.