Memorandum of Conversation, by Mr. Kermit Roosevelt, Jr., Assistant to the Assistant Secretary of State (Acheson)25

Participants: Dr. T. V. Soong, Chinese Minister for Foreign Affairs
PA/H—Mr. Hornbeck
A–A—Mr. Acheson
A–A—Mr. Roosevelt

Dr. Soong called on Mr. Acheson at Mr. Acheson’s request.

Mr. Acheson handed informally to Dr. Soong a draft note26 on the subject of reciprocal lend-lease which it is contemplated might be addressed to the Secretary by Dr. Soong.

Attached to this note were copies of the Chinese master agreement and the exchange of notes on reciprocal aid with the United Kingdom for convenient reference of Dr. Soong.

Mr. Acheson explained that we had exchanged similar notes with other countries, as supplements to the formal lend-lease agreements, setting forth the general types of reciprocal aid to be provided United States forces and government agencies. He pointed out that these notes did not bind the government to provide us with specified amounts of aid but simply described the types of aid which would be offered. The amounts, of course, are determined by the providing government.

Mr. Acheson went on to explain that in the U.K., for example, aid has been provided in two ways. The British have purchased equipment or materials and turned them over to our forces, or our forces have done the procuring themselves on British account. It has been found desirable, in some instances, for the British to provide funds of their currency to facilitate reciprocal aid. In the draft note submitted to Dr. Soong we have, in the light of previous experience elsewhere and of special conditions existing in China, made specific provision for currency to be received as reciprocal aid. Mr. Acheson remarked that Dr. Soong was undoubtedly familiar with the problem that our military has been called upon to face. American soldiers have been taking the dollars they receive as pay and buying Chinese currency on the black market. To police this would require as many soldiers again as we already have in China. To correct this situation we would like, under the terms of the proposed agreement, to be able to have our representatives in China call upon the Chinese authorities, discuss their needs for special war purposes, and receive from the [Page 538] Chinese authorities whatever funds in Chinese dollars those authorities felt they could provide as reciprocal aid. Then, as a separate transaction, our representatives would turn over to Chinese authorities the dollars they had planned to spend on salaries, et cetera, and the Chinese lend-lease account would be credited to that extent.

Dr. Soong commented that this would avoid the problem of the exchange rate. He went on to say that he was very glad to receive this draft and that he hoped it would clarify many questions which now perplexed both Governments. He said that he realized that the official exchange rate was out of line with actual purchasing power, and that many American officers felt that they were being “gypped”. So far as diplomatic establishments were concerned, he had long ago suggested to the Generalissimo that a special rate be granted. A special rate, however, has certain disadvantages from the domestic viewpoint. Nevertheless, he understood that Dr. Kung has finally agreed to offer a special exchange rate to diplomatic and consular services which will be a fifty percent improvement over the official rate. Dr. Soong feels, however, that the proposed agreement may offer a better solution.

Dr. Soong said that he would communicate it to his Government immediately and hopes that he will be able to present us with a reply soon.

Kermit Roosevelt, Jr.
  1. Substance of this memorandum reported to the Chargé in China in Department’s telegram No. 637, May 19, 9 p.m.
  2. Infra.