893.51/7731: Telegram

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

105. At his request I called on Chiang Kai-shek last evening accompanied by Atcheson. Mme. Chiang, who acted as interpreter, was only other person present. Chiang asked me to communicate following telegram to the President, in reply to latter’s message (Department’s 25, January 5, 5 p.m.).

“I am in receipt of your recent telegram sent through Ambassador Gauss and am glad you have recovered from your indisposition. I fully appreciate the fact that even during your illness you were endeavoring to find a solution to China’s economic problems.

“The proposals of the Treasury Department are, to my mind, not those of one Allied nation to another, but savors of a commercial transaction. These proposals, if put into practice, would not enhance China’s economic strength in carrying on the war; on the contrary, they would only add to her economic difficulties as a result of the impairment of the people’s confidence in the fapi. Were it not for the most critical stage that we are entering today I would not make this urgent appeal to you. After mature consideration of the future precarious economic situation in the China theater of war I have come to the following conclusions: [Page 836]

An out-and-out 1 billion dollar loan from America would enable us to meet part of the deficit of the coming war budget and also to cover through reverse Lend-Lease part of the American military expenses in China, such as the construction and repair of air fields including the necessary installations, the feeding of your army and transportation of your war materials, et cetera.
If the Treasury Department is of opinion that it is unable to accept the above proposal, I would suggest that whatever expenditures incurred by the American Army in China should be borne by the American Government. The Central Bank of China will facilitate the exchange at the official rate of 20 yuan to United States dollar. Rate is unalterable because we cannot afford to shake the people’s confidence in the fapi, which is a stabilizing factor in a world of uncertainty, brought on by the vicissitudes of war. Only thus can we directly maintain the credit of the fapi and indirectly save China from economic collapse, which would seriously affect the whole war situation of the Allies through her inability to continue resistance for a considerable length of time.

“The second proposal is an out-and-out help which the Chinese people and Army would appreciate, and when we came to consider that America has been feeding even British and Russian civilians it is entirely in accordance with the Allied strategy of pooling of resources. I may point out here, as an example, that after the battle of Changteh 300,000 houses in that area are now in ruins and less than 10 buildings still remain. In this respect the civilians throughout China have suffered incalculable losses since the beginning of our war of resistance 7 years ago. Our sacrifice in men and materials, both military and civil, stand as a convincing testimony of our willingness to give all that we are and all that we have to the Allied cause.

“The 57th Division, one of the crack units of China, has been entirely sacrificed.

“When I saw you in Cairo I felt keenly that with your wisdom and vision you fully comprehended the critical situation which now faces China and that you were eager to extend every means of practical help to our people so as to enable them to march forward shoulder to shoulder with your people to common victory. I was so heartened that I hastened to reassure the Chinese people of the strength and solidarity of our united efforts. I am still convinced that as leader of Allied Nations you will do your utmost to enable China to continue our resistance and do our full part in global war. I am sure you will realize I will do everything in my power to rally the support of the Chinese Nation for a speedy victory and that I have even gone to the length of delaying reopening of the Burma route so that essential amphibious equipment should be diverted to European theater of war, thereby disappointing all sections of my fellow countrymen who still bear in memory the scar of the fiasco of the last Burma campaign [Page 837] thru which China lost great quantities of equipment and men thru no fault of her own.

“In case the Treasury Department feels unable to accede to either of the above two proposals then China will be forced to take the only course open to her, that is, to continue with all her available strength and for as long as possible the resistance against our common enemy Japan, thus discharging in a way the responsibilities incumbent upon her as a member of the United Nations. In that eventuality she would have to allow her war economy and war finance to follow the natural course of events. Such being the case, the Chinese Government will have no means at its disposal to meet the needs of the American Army in China, and consequently the American Army in China will have to depend upon itself to carry out any and all of its projects, for much to our regret, we shall be inevitably placed in a position in which we cannot make any further financial or material contribution, including construction of works for military use. Chiang Kai-shek.”

Separate message reports conversation with Chiang.29

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