The Ambassador in China (Gauss) to the Secretary of State
[Received January 17—11:12 a.m.]
106. In handing me message for President communicated by my 105 of today, Chiang made oral comment as follows:
What he had to say was as United Nations CinC in this theatre. He asks that I inform State and Treasury (and later added War Department) that China would not ask for anything except for the critical military and economic situation in this country as China has pride in being self sufficient and in helping herself; that he could assure me any financial or material assistance rendered China by us would not be hoarded for post-war purposes; that China would not take advantage of any situation to profit thereby and China is “neither a petty thief nor a robber baron” (we interjected smilingly that he was using “strong language”). He said China did not ask for assistance last year or year before; situation now is incomparably worse than a year ago and cost of assisting American Army here has become so great a strain that China cannot keep up such assistance and if United States Treasury cannot help China financially United States Army in China will have to depend on itself from March 1 on; United States Army has 6 weeks to make preparations and after March 1 [Page 838]China cannot be of material or financial assistance in any projects United States Army may have in mind and I inquired whether this meant China would be unable to cooperate militarily with United States Army in China. Chiang said that what he meant was that after March 1 United States Army must look after itself. Atcheson said he assumed this means United States Army must finance itself and also make arrangements for purchase of supplies and construction materials and also labor and Chiang said yes, China will of course continue fighting as long as she can; as indicated in later part of his message to Pres. she will carry on until the inevitable economic and military collapse and then she will do the best possible under circumstances then existing, He said that within last 2 weeks he had given approval to requests of our Army Headquarters that Chinese undertake airfield projects which would cost huge sum of 13,000,000,000 and China simply cannot finance such projects. (Mme. said as “interesting sidelight” that every United States soldier in China costs Chinese Government CNC 300 per day and there are several thousand United States soldiers with great increase in number contemplated—at current cost of “military Rici” CNC 300 would feed a Chinese soldier for a month; after March 1, United States Army would also have to feed its own soldiers and America will have to depend upon itself. She mentioned that date March 1st was in implementation of Gmo’s29a statement in last paragraph of his message to President.)
I stated my impression that view of American economists is to effect that no amount of American money in United States to the credit of China could remedy China’s financial and economic situation any more than if the whole of our machine gun output were hypothecated to China and remained in United States. Chiang replied that American economists know American economy and in general world economy but not Chinese economy or Chinese psychology and latter has great deal to do with situation here. Exchange rate is absolutely unalterable; maintenance of fapi is necessary to sustain public confidence; a loan, even with the actual cash remaining in United States, would be looked upon by Chinese people as reserve for fapi.
In response to Atcheson’s inquiry he said question of commission proposed by Morgenthau was covered in his message in reference to Treasury proposals. Atcheson mentioned that this was a suggestion by President. Chiang replied that commission would be working under Treasury direction and looking along lines of Treasury proposals. (After my return to Embassy, Mme. telephoned me to say that if commission was planned to discuss Treasury proposals there was no use in its coming but if it was sent to discuss Gmo’s two proposals it would be welcome.)[Page 839]
Among various arguments put forth by Mme. Chiang was one that United States Army expenditures of some United States dollars 20 million per month could not be dumped on black market in a day and that dumping of even 1 million American dollars would swiftly and extensively drive down black market rate.
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