893.00/11–2847: Telegram
The Ambassador in China (Stuart) to the
Secretary of State
Nanking, November 28,
1947—11 a.m.
[Received 11:03 a.m.]
2302. Following memorandum was handed me by Dr. Young on November 27 in
Shanghai:
- “1. The worsening of conditions in China is reflected in rise
of black market foreign exchange rates by over 50 percent since
November 15 and in sharper price rises than ever before in
several regions. Disappointment of unrealistic hopes of American
aid and bad military news touched off the rise which, however,
is basically due to the flood of easy money aggravated by a fall
of confidence in the future outlook. Money is being sent abroad
in growing volume by persons including officials who fear not
only financial deterioration but also the increasing penetration
of Communists in central China and possible disorders started by
them in Shanghai or elsewhere. Some also are going to Hong Kong
‘for the winter’. The fall of confidence could easily ‘snowball’
and lead to a breakdown though obviously no prediction as to
time would be possible.
- 2. The urgent need is to avert a breakdown. Clearly the
Chinese Government unaided cannot take effective action to stem
tide, especially since acute inflation is a disease with
insidious paralyzing effect on the whole range of civil and
military activities. Whatever Government’s faults or
responsibility re the state of affairs, there is nothing to take
its place but the Communists. If a crisis should lead to the C–C
group taking full control they could not cope with the situation
and failure would come quickly because of their unsound ideas
and lack of financial and other technicians.
- 3. The only hope of averting a breakdown is the earliest
possible commencement of a program of external aid and internal
reform. The sooner such a program is begun the less difficult it
will be to deal with situation. Meanwhile something is needed to
revive hope in China, preferably inclusion of aid to China in
the emergency program of the special session of Congress even on
a modest scale such as U. S. dollars 60 to 75 millions, together
with an official statement that means to aid China are under
active consideration with a view to being put into effect at the
earliest possible time.”
