893.51/7762: Telegram
The Ambassador in China (Gauss) to the Secretary of State
Chungking, March 28,
1944—1 p.m.
[Received 7:56 p.m.]
[Received 7:56 p.m.]
541. To Secretary of the Treasury from Adler. Current status of negotiations on Army expenditures in China.
- 1.
- Embassy and Army submitted a proposal to Minister of Finance at end of January involving in essence a rate of 100 to 1 for our expenditures in China. This the Chinese rejected and submitted a counterproposal of 30 to 1 which we in turn rejected as “not satisfactory and not reasonable.” There matters have stood except that Chinese have advanced us CN 1,000,000,000 monthly for our direct expenditures and have proceeded with work on more urgent bases.
- 2.
- Generalissimo apparently getting restless at present situation. Accordingly after securing agreement of War Department Acheson will submit following proposal. To the beginning of each 3–month period we shall decide on a sum of United States dollars to be paid to Chinese Government’s account while Chinese will advance our fapi needs during the period. We will repeat figure we advance for next 3 months on basis of rate between 100 and 200, probably closer to the former though no reference to exchange rate will be made in agreement. While our fapi requirements will be kept secret, Chinese may publicize our United States dollar “contribution” if they think it desirable for stabilization purposes. Decisions on final benefit derived by China and United States respectively to be left to postwar negotiations. Chinese to be urged to sell gold on due currency on joint account to raise part of our fapi requirements.
- 3.
- Embassy is strongly supporting this proposal as present most realistic
basis for discussion which I endorse on following grounds:
- a.
- Generalissimo’s face is saved by absence of reference to exchange rate which would be difficult to shake without a show-down. At same time tri-monthly ratio between two “contributions” would tend to become de facto rate of final settlement for obvious reasons.
- b.
- Desirable avoid immediate show-down and to keep negotiations going apart from political reasons as Chinese still advancing fapi and proceeding with construction of more urgent bases, which at present rate of progress will be completed April 15. Better to have bases and headaches after April 15 than headaches without bases.
- c.
- Chinese more likely to accede to sale of gold et cetera on joint account than to sale on our gold account; also more gold et cetera likely to be sold if on joint account as Chinese cooperation essential in sales.
- [Adler]
- Gauss