Office of the Historian

893.5151/976: Telegram

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

Chungking, December 14, 1943—8 p.m.
[Received December 15—9 a.m.]

2417. To Secretary of Treasury from Adler. Re Department’s 1784, December 11.

1.
Called on Kung yesterday evening and informed him accordingly. He said that a price of 100 to 1 was out of the question and that he would rather give us the CN dollars 400 million without any return than take United States 4 million for it. As for our importing United States currency to cover our needs, he personally had no objection as he believed that sales in any quantity would push price down below 50 but his Cabinet colleagues were opposed on ground that fapi would tend to be displaced. All he offered was:
a.
Repetition of his previous statement that he was to go over USAAF requirements with Generalissimo and Stilwell in near future to determine how much China could undertake to cover under Reverse Lend-Lease.
b.
Agreeing, subject to his Government’s confirmation, to our buying a portion of our fapi requirements at the official rate and to Chinese Government’s advancing the remainder, the advances to be credited to Reverse Lend-Lease at official rate. The portion he appeared to have in mind was one-third, but he would make no commitment prior to consulting with his colleagues, though he did say that the portion might be less than half “if necessary”.
2.
I indicated that the price of United States dollars had become an outstanding issue for all United States Government agencies in China relations and that the working out of a satisfactory arrangement was advisable from point of view of Sino-American relations. Kung replied that “the Generalissimo had said no.” When I inquired again into the possibility of the sale of gold, Kung informed me that Chinese Government sales had been quite small, its policy being to buy back a substantial part of what it had sold to keep up price which is now around CN 13,000 per Chinese oz. selling in Chungking.
3.
Kung intimated that Generalissimo had discussed exchange rate with President in Cairo64 but did not inform me of content of discussion.
4.
I pointed out that Chinese Government was giving 30 to 1 for diplomatic, etc. expenditures to which Kung replied that amount granted over and above official rate which he said would be raised from 50 to 100 percent in near future, was a subsidy from the Chinese Government.
5.
Obvious from above and previous conversations with Kung that it will require considerable pressure to get even a moderately satisfactory arrangement from the Chinese. [Adler.]
Gauss
  1. The records of the Cairo Conference are scheduled for publication in a subsequent volume of Foreign Relations.↩