102.1/7–447: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received July 5—4:57 a.m.]
1463. To State and Treasury from Adler. Reference Embassy’s telegrams 1301 and 1302 of June 14.93 Governor of Central Bank called on me yesterday to resume discussion of his silver project. He recapitulated the advice he has been pressing on the Generalissimo for the need to introduce sharp line of demarcation between the military zone in North China and Manchuria which should rightly be under military control and a civil zone in south or central China in which military influence should be curtailed and in which there should be a concentrated attempt at economic rehabilitation and relative self-sufficiency. [Page 1155] He was also pressing the Generalissimo to reduce expenditures, but the Generalissimo replied that while he agreed on the need, it was impossible to do so as long as prices rise. Therefore, the Governor concluded, with respect both to internal fiscal policy and foreign exchange policy, where he would like to go ahead with adjustment of exchange rate and export-import linking program but cannot because of unsettled conditions, he is confronted with the need for a new unit of account. He said he needed at least 200 million ounces of silver to give him an umbrella for this operation.
Apparently giving up the prospect of an undisguised loan, he raised the possibility of China’s purchasing this amount of silver from the United States and asked me to convey to you a request for the possible terms on which such a purchase might be made. With respect to price, he was not specific but called attention to the fact that the Mexican price was lower than the New York price.
With respect to other terms, he alluded to the possibility of a credit, but in general he took the position that he would prefer the seller to indicate terms.
When asked what the Central Bank’s foreign exchange position was, Governor replied that it had equivalent of US $350,000,000 in gold, United States dollars and sterling area currencies, of which I believe $60,000,000 is committed to the National City Bank, Chase and the Bank of China for first and second quarters 1947 cotton quotas. [Adler.]
- Latter not printed.↩