893.51/7743: Telegram
The Acting Secretary of State to the Ambassador in China (Gauss)
251. 1. Please inform Dr. Kung that this Government has given careful study to his counterproposals reported in your 233 of February 3 and does not regard those proposals as reasonable or satisfactory.
[Page 874]2. Department is informed by War Department that on the understanding that the Chinese have advanced CN dollars 1 billion to our military authorities in China, the sum of US dollars 25 million is being credited to the Chinese as suggested by General Hearn. The War Department is notifying General Hearn to this effect. Department sees no objection to your referring to this in your conversation with Dr. Kung. However, if you do so you should make it clear that these two transactions must be regarded as separate transactions and as in no way constituting an agreed ratio between Chinese and American currency for our military expenditures in China. Department recognizes the necessity of General Hearn’s obtaining the best possible interim arrangements but considers it desirable that the Embassy not give any indication that this Government regards such arrangements as definitive or as in any way constituting adequate cooperation by the Chinese Government in the war effort.
3. For your information this Government is carefully evaluating all relevant military and political factors involved in this situation with a view to issuance of appropriate instructions to its representatives in China. In the event that inquiry is made by the Chinese authorities as to this Government’s attitude in regard to future developments you are authorized to inform them that we are giving most thorough study to all aspects of the problem.