The Consul General at Shanghai (Davis) to the Secretary of State
[Received January 22—4:45 a.m.]
174. From Adler to Secretary of Treasury.12 Consul General Davis, Casaday13 and I saw Pei14 on Jan 15 (reurtel unnumbered of Jan. [Page 1033] 15,15) on a number of problems connected with exchange. I again raised problem of equitable arrangement for Army and Navy expenditures. Pei proposed to make temporary advances to Army and Navy for unspecified but limited period, implication being that settlement for such advances would be made immediately after adjustment had been made on the official rate at the new official rate. Though I had not yet received your unnumbered telegram of Jan. 15 I indicated his proposal was not feasible. Saw T. V. Soong16 Jan. 17 and he promised me an answer over the weekend. Returned to Nanking Jan. 18 to confer with Embassy, coming back to Shanghai Jan. 20.
Consul General Davis and I saw Soong and Pei again this morning (see Shanghai serial to Embassy 115 of Jan. 2117). They agreed in principle to a special arrangement for Army and Navy expenditures, Soong insisting that matter be kept secret. Soong designated Pei to negotiate details. Casaday and I are seeing Pei Jan. 23.
Sent Dept 174; repeated Nanking 120. [Adler.]