Office of the Historian

893.5151/11–146: Telegram

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

Nanking, October 31, 1946—11 a.m.
[Received November 1—12:45 a.m.]

1778. From Adler to Secretary of the Treasury.

1.
In conversation with T. V. Soong on October 29, he reviewed China’s exchange and financial situation with respect to Embassy’s telegram 1595 of October 4. Soong said no action would be taken until after Rogers’59 arrival early in November. (Rogers was formerly financial adviser to the Chinese Government and has been released by the Bank of England to become adviser to Central Bank.)
2.
UNRRA, surplus property deal, Export–Import Bank credits and enemy property in China were of tremendous assistance, as would also be Japanese reparations, even though latter would be confined to capital goods and problem of furnishing working capital would be sizeable. I pointed out that [the?] fact that for a variety of reasons [Page 1018] large part of UNRRA China program would arrive in 1947 [and] should provide some relief to China’s balance of payments problem next year. Soong agreed that this would be case which [with?] such goods as would replace commercial imports. He pointed out imperative need for China to increase her domestic cotton production in order to reduce present abnormal dependence on foreign cotton, and said that in spite of pressures on him he intended drastically to slash large requests for foreign exchange expenditures by Ministries of War and Communications in 1947. Soong cursorily mentioned International Monetary Fund and Bank, saying China was not yet in a position to obtain assistance from Fund and asking what countries had requested loans from Bank. He is apparently toying with idea of asking either or both institutions to send representatives to China.
3.
Soong confessed that China’s exchange problem insoluble without amelioration of domestic fiscal and price situation. He showed considerable interest in recent currency experience of enemy-occupied countries in Europe and of Japan, but agreed that their situation very different from that of China. I took opportunity to reiterate that there were no easy or trick solutions for China’s financial and currency problems.
4.
With respect to fiscal situation, he hoped that large scale fighting would cease fairly soon, in which case it might be possible to reduce the huge drain of military expenditures, though he was not too positive on this point. He hoped that Government receipts this year would be CN dollars 2½ trillion, with 1 trillion from taxation, etc., and 1½ trillion from such non-recurring items as sales of enemy and surplus property, gold, and foreign exchange of which sales of enemy property are expected to yield about 700 billion. It will be noted that this estimate of 1946 receipts presupposes a very substantial improvement in the last quarter over the first three quarters of this year. Soong discussed the possibility of improving China’s tax system, again agreeing that crux of problem was establishing adequate enforcement and collection systems. When asked about estimated expenditures for 1947, he replied that he was trying to keep them within 7 trillion. Pressure from the various ministries was considerable but he was trying to hold the line. (Ministry of Communications has asked for 945 billion for railroads alone in 1947.) [Adler.]
Stuart
  1. Cyril Rogers.↩