102.1/3–447: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received March 4—3:06 a.m.]
436. From Adler to Secretary of Treasury: Text of exchange of letters between Pei and me and all background material transmitted as enclosure 2 of my letter No. 5 of February 4 to Jenkins.99 (Reference your telegram 248 of February 28.) In your telegram 104 of January 28 to me in Shanghai1 you agreed to use of phrase “for time being”. This phrase was vital to both parties as with obviously unstable situation Hong Kong cross rate might easily cease to be a reliable indicator. Since exchange adjustment of February 16 Hong Kong-cross rate appears to have been lower than official rate in Shanghai, and we are at the moment better off using official rate than Hong Kong cross rate. There is therefore nothing to be gained by raising question of Hong Kong cross rate with Chinese Government now, though it can be used as a precedent later.
It should be pointed out that as period of increasing instability is to be expected, we must be prepared to adopt temporary expedients [Page 1085] and if there is no alternative to finance Government expenditures by sale of U. S. currency. The expedient of the Hong Kong cross rate saved the U. S. Government a considerable sum of money, as following quotation from cable from Navy Shanghai repeated to me underlines: “Rates obtained were above our fondest hope. Six billion of one three settled at eleven nine hundred. Seven five million of one four at ten seven hundred.” [Adler.]