Foreign Relations of the United States: Diplomatic Papers, 1943, China

893.515/1545b: Telegram

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

Washington, January 5, 1943—4 p.m.

24. For Adler⁸ from the Secretary of the Treasury.⁹

Part I.

1. Mr. Hsi Te-mou¹⁰ called on the Treasury on December 29, 1942 regarding the possibility of lend-leasing silver to China for coinage purposes. He said that he had been instructed by Dr. Kung¹¹ to raise this matter with the Treasury.

2. The Treasury and other interested agencies have been considering the possibility of lend-leasing silver to members of the United Nations for coinage purposes. The terms on which the United States would be willing to lend-lease silver have not yet been completely determined but it is probable that the lend-leased silver will have to be returned on an ounce-for-ounce basis within a fairly reasonable period after the war. The lend-leasing of silver to members of the United Nations for coinage purposes is designed chiefly to overcome difficulties created by the presence of large numbers of American troops in certain countries.

3. Mr. Hsi was informed that the Treasury felt that under present circumstances the lend-leasing of silver would not seem to be practical and feasible largely because of shipping and minting difficulties involved. The United States minting facilities are already overtaxed and the trend here is to decrease as much as possible the minting of coins requiring silver and other metals needed for the war effort.

4. Please inform Dr. Kung of the above.

Part II. For your information, the consideration[s] which guided the Treasury in coming to the above conclusion on lend-leasing silver to China were:

1. In order to have any effect on the situation in China, China would probably require very large amounts of silver. This raises problems both as to shipping the silver and minting the silver into coins.

(a) It is difficult to see how, under present conditions, large shipments of silver could be arranged.

(b) It is presumed that most of the minting would have to be done in the United States. Our minting facilities are already overtaxed. Furthermore, the minting of silver coins requires alloys which are in short supply at present and the trend here is to decrease as much as possible the minting of coins requiring metals needed for the war effort.

2. It is likely that any coins released for circulation in Free China would practically immediately go out of circulation into hoarding. Furthermore, it could be expected that the silver content of the coins would soon be worth more than their face value, and, therefore, the coins would be melted down for their silver content. Unless coins were issued in very large amounts, it could not be expected that the hoarding of such silver coins would have any appreciable retarding effect on the rise in prices.

3. The lend-leasing of silver would require a special arrangement and could not be done under the existing lend-lease agreement.¹²

4. China would have to return the silver on an ounce-for-ounce basis after the war. Of course, there is the possibility that China could purchase silver after the war to meet any obligation incurred under such an arrangement, but there is no guaranteeing what price she would have to pay for such silver.

5. In certain countries, such as Australia, the presence of large numbers of American troops, coupled with the increased need for coins because of increase in production and rise in national income has led to shortages of coins which threaten to diminish the economic capabilities of such countries. It is presumed that China does not fall within this category. [Morgenthau.]

Hull

8. Solomon Adler, American alternate member of Chinese Stabilization Board.
9. Henry Morgenthau, Jr.
10. Representative of Chinese Minister of Finance on mission to United States.
11. H. H. Kung, Chinese Minister of Finance.
12. Signed at Washington, June 2, 1942, 56 Stat. 1494; see also Foreign Relations, 1942, China, pp. 566 ff.