893.51/7742: Telegram
The Ambassador in China (Gauss) to the Secretary of State
[Received 2:15 p.m.]
189. In pursuance of request of Generalissimo that our proposal be submitted to Minister [of] Finance, Gen. Hearn and I saw Kung yesterday afternoon in company of Counselor Atcheson and Dr. Acheson and submitted the Somervell—Clay proposal as formulated by Dr. Acheson in consultation with Adler of Treasury, Colonel Gaud (military Lend-Lease officer) and Embassy. (This refers to my 181, January 28.) Proposal as formulated substitutes for 20 to 1 exchange rate the “present highest authorized conversion standard for foreign exchange transactions (20 to 1 plus 100 percent)” which as reported in my 135, January 21, has been made effective from January 20 for “certain funds” remitted from abroad. While the new arrangement is intended to apply only to “certain funds” for certain purposes it in effect establishes a new rate by using the old rate with a supplement and I believe and our collaborators agreed that we should endeavor to have army funds included within its scope in connection with the proposals. Kung delivered himself an exposition of his position regarding the exchange rate, the Chinese and regarding reserves for currency, etc., and then stated that the proposal would be considered and an answer returned.
As we left Kung said to me with an indulgent smile that we would get our money but he didn’t like the exchange rate suggested. I am unwilling to believe however that we have yet made any real headway.