102.1/7–2246: Telegram
The Consul General at Shanghai (Davis) to the Secretary of State
[Received July 22—8:40 a.m.]
1318. For Secretary of Treasury from Casaday: Refer telegram from AmEmbassy Nanking No. 1160, July 18, to SecState.
On returning to Shanghai, I discussed question of no-rate CNC advances with Tsu-yee Pei, Governor of Central Bank. Pei said he believed Minister of Finance erred in flatly refusing Navy’s requested advance of 2 billion CNC without prior deposit of US dollars. He said Navy’s [Army’s] recent request for advance of 5 billion CNC was not flatly refused as I had understood Minister to say. The Army advance was made subject, however, to the condition that all drawings on the advance after July 13, 1946, be currently reimbursed by sale of US dollars by the Central Bank at its prevailing rate. Questioned as to the meaning of the words “currently reimbursed”, Pei indicated that reimbursement in dollars by the time the advance was approximately used up (presumably about end of July) would be satisfactory (so far as the present advance only is concerned) because he realized it would take some time to clear this matter with Washington and he did not want to see the US armed forces embarrassed for lack of funds.
Accordingly, Pei asked me to wire Commander Stratton that regardless of what the Minister may have told me, the Central Bank is prepared to advance to the Navy enough CNC to meet its minimum requirements for the month of July on the assumption that this procedure will have been cleared in Washington by the time the advance has been spent. In order not to give the appearance that the Bank is going over the Minister’s head on an identical application for advance, Pei suggested that I ask Stratton to request some other amount than exactly 2 billion and that he indicate that the amount requested represents the Navy’s minimum requirements period it may be expected to take to clear the new procedure in Washington.
[Page 994]I have informed Stratton by wire that if he will put in a new request for advance, the Bank will have the amount placed to his credit in the Central Bank, Tsingtao, without delay.
Presumably, future advances will have to be reimbursed currently as drawn.
Sent Dept as Shanghai serial 1318, July 22, 3 p.m., repeated Nanking as 72. [Casaday.]