102.1/2–2247: Telegram

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

345. From Adler to Secretary Treasury and on Butterworth’s request for appropriate distribution in Department of State. Returned Nanking February 21.

(A) Saw Soong in Shanghai February 18. He informed me that impact of emergency regulations in Shanghai was successful and that he intended to enforce them vigorously—in an aside he said that secret service was acting under his personal instructions.

He then proceeded to raise the following problem. The Government had promulgated measures governing foreign exchange and deposits abroad on February 16 (cabled by Embassy on February 17 [16]91) and was preparing supplementary regulations to enforce [Page 1080] them. He wished to obtain Treasury’s informal response to these supplementary regulations adding that without foreign cooperation they could not be enforced. I said, “Then you are asking for our cooperation?” To which he replied, “Not asking but begging.”

Saw Soong again on the 19th when he informed me that his plan was first to require registration of all Chinese assets abroad, after which the Government could decide on steps to vest them. He repeated that without American and British cooperation, this measure could not amount to much and told me that he was asking for British cooperation also, particularly with respect to Hong Kong. The forms of cooperation he envisages are:

Receiving a list of Chinese depositors in the US and in the British Empire.
Reblocking of Chinese assets in the US and the sterling area.

He, of course, realizes that (b) is quite unlikely. On February 20 he sent me a draft of the proposed regulations which are transmitted in Section II.92

(B) Undoubtedly China’s balance of payments position is such that there is a case for vesting Chinese private assets abroad. From our point of view this case is all the stronger, since it is inevitable that with the running down of her official foreign exchange holdings her requests for financial assistance from US and from the International Bank will become more frequent and pressing.

At the same time:

It would have been preferable for the Chinese authorities to begin by moving effectively against Chinese private foreign exchange assets in China—particularly gold and foreign currencies—before asking for our cooperation on the vesting of Chinese private foreign exchange assets abroad.
For the Treasury to give a list—if available—of Chinese private depositors in the U. S. to the Chinese Government would create an awkward precedent.
Reblocking of Chinese assets in the U. S. would constitute a flat reversal of the domestic policy to which we are committed—namely, the gradual relaxation and eventual abandonment of wartime economic and financial controls.

I accordingly recommend that the Treasury’s reply to Soong’s request for cooperation be sympathetic and friendly in tone but noncommittal in substance and making reference to (B) 1 above.

(C) I understand that Soong will go ahead with the regulations, whether or not foreign cooperation is forthcoming, but that he may delay their announcement until he hears from you and from British Treasury. [Adler.]

  1. Unnumbered telegram not printed, but see footnote 89, p. 1071.
  2. Received in the Department as telegram No. 344, February 22, 5 p.m.; not printed.