The Secretary of State to the Ambassador in China (Stuart)
13. From State and Treasury for Ambassador and Adler.2 Navy states its supply of no-rate yuan3 exhausted. If obliged to procure yuan at official rates, will be forced to curtail drastically its program in China. Appropriations inadequate to finance existing program at official rate, and believed impracticable to seek deficiency appropriation. War position similar. Navy and War propose that Chinese Govt be advised informally of foregoing facts, either by Emb or by War and Navy representatives, and notified that unless arrangements can be completed by Jan 16 for procuring yuan through official channels at rate approx open market rate for US dollar currency, or unless Chinese Govt signifies preference for curtailment of War and Navy programs, War and Navy will on Jan 16 begin sale of US dollar currency at best obtainable market rate to meet yuan requirements. This would be considered an interim emergency measure, pending working out of permanent arrangements such as special exchange rate through Central Bank or Chinese Govt for US Army and Navy purchases of yuan with US currency or US dollar credits to Chinese account in US, such rate to approximate open market rate for US currency on date of purchase, or rate based on Central Bank selling price to public for gold.
Any other arrangements Chinese Govt may propose which will permit carrying out of War and Navy programs in China at reasonable US dollar cost will be sympathetically considered.
State and Treasury request your comments urgently. [State and Treasury.]