893.51/1–1745: Telegram

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

74. To Secretary of Treasury from Adler. Re your 40 of January 8.

In a detailed discussion Ambassador Hurley expressed full agreement with your 2. He agrees that there is no advantage from either an economic or political point of view to acceding to China’s request. In view of the present situation in China which precludes effective use being made of the gold and in view of large amounts involved, he [Page 1057] is strongly of the opinion that the very substantial advantages China can derive in the future from her large foreign exchange resources should not be sacrified for such dubious and nebulous advantages, if any, accruing from the sale of gold now. However, Ambassador Hurley, who also endorsed policy pursued by Treasury with respect to shipment of gold to China in the last year, feels that the same policy should be continued for the time being in order to save China’s face.
It is suggested that the following among others might be given as convenient reasons for not acceding to the Chinese request:
Your 2.
The tense military, political and economic situation in China which the large-scale sale of gold would in nowise relieve.
The fact that the sale of gold is at best a palliative and a temporary one at that.
The fact that the contemplated sale of gold is not a part of any integrated scheme for tackling China’s urgent economic problems, but is merely an isolated measure.
The probability that substantial part of the gold sold would end up in occupied China. (In fact, I learn from reliable sources that this has been the case with respect to past gold sales.)
For your information, there is a common feeling in Chungking financial circles that O. K. Yui7 will not keep his present position much longer. T. V.8 is maintaining a lively interest in the financial situation.
K. K. Kwok9 informs me that the Central Bank has already sold half a million ounces gold forward at CN10 dollars 20,000 per ounce. This price is much below what the traffic could bear. [Adler.]
  1. Chinese Minister of Finance.
  2. T. V. Soong, Acting President of the Chinese Executive Yuan; Minister for Foreign Affairs.
  3. General Manager of the Central Bank of China.
  4. Chinese national currency.