Office of the Historian

102.1/3–2847: Telegram

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

Nanking, March 28, 1947—3 p.m.
[Received March 28—7:30 a.m.]

682. From Adler for State and Treasury.

1.
Was informed by Minister of Finance and head of Ministry’s Bond Department28 that two new Government issues will be:
(a)
Three-year Treasury notes amounting to CN dollar equivalent of U. S. dollars 300 million, paying 20 percent per annum and redeemable on basis of CN dollar-US dollar official exchange rate at time of redemption. Executive Yuan thought 20 percent interest rate too high but Legislative Yuan felt it was too low. (Black market interest rates are around 20 percent per month.) Backing for Treasury notes consists of alien property not yet disposed of and revenues of Government enterprises. One objective of flotation of Treasury notes is to render possible orderly liquidation of Government holdings of alien property. Most important stated objectives are fiscal and absorption of idle capital.
(b)
US dollars 100 million of 10-year bonds, paying 6 percent per annum, to be purchased in gold, U. S. currency, and other foreign exchange instruments, and redeemable as to both principal and interest in foreign exchange. Backing for bond issue is Government’s foreign exchange resources. Objectives of bond issue to absorb private foreign exchange and conserve official foreign exchange.
First flotations of both issues will be on April 1 in denominations of U. S. dollars 5,000; 1,000; 500; 100; and dollars 50; the Treasury notes, of course, to be purchased with CN dollars. While these issues are receiving considerable amount of favorable publicity, difficult to see how they can achieve much success.
2.
Minister of Finance also informed me that Legislative Yuan had recommended suspension of issue of any currency denomination over CN dollars 5,000 but that recommendation had not yet come before Executive Yuan and Supreme National Defense Council, where he would vigorously oppose it when it did.

Repeated Shanghai as 308. [Adler.]

Stuart
  1. P. T. Chen.↩