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

In view of inquiries made by the British Finance Mission (Mr. Playfair) and the Australian Legation (Mr. Brigden) some weeks ago as to whether we plan to take any steps to alleviate the exchange difficulty which foreign officials are subject to in Chungking, I telephoned to Mr. Grant (in Mr. Play fair’s absence) and to Mr. Watt (in Mr. Brigden’s absence) after discussing the question with FE, EU and A–A.

In both cases I recalled the previous inquiry, our previous statement that we had the matter under consideration and hoped to propose to the Chinese some ameliorative action under Lend-Lease arrangements, and then stated that on Saturday last (May 15) Mr. Acheson had delivered to Dr. Soong a draft reverse Lend-Lease Agreement containing a provision that as part of the assistance to be supplied by China, the Chinese might furnish the American armed forces and official establishments with needed amounts of Chinese currency. I explained further that in so far as exchange difficulties were concerned, it was our hope that this device would suffice to permit our dollar expenditures in China to be assured of fuller purchasing power than was possible at the official rate of exchange. I explained that in some cases the proposed assistance by way of delivery of amounts of Chinese currency might simply be in lieu of the direct delivery of materials or services and in such cases would bear no relation to exchange difficulties as such.

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In each case I also requested that the information be regarded as confidential and that no action be taken to approach the Chinese with any similar plan until we had had an opportunity to ascertain the Chinese reaction to our proposal. I said that it was our desire that the Chinese consideration of our proposal not be complicated by the necessity for simultaneous consideration of any similar proposal from other countries. In both cases there was an expression of thanks for the information and an assurance that any action vis-à-vis the Chinese would be held in abeyance until further word from us.