893.51/4–1048: Telegram

The Consul General at Shanghai (Cabot) to the Secretary of State

820. For Treasury, State, Commerce from Casaday. Generalissimo’s10 “state of nation” address yesterday 9th (which understood being fully reported by Embassy11) featured in Shanghai press this morning. Generalissimo’s remarks on financial position somewhat differently reported by UP and Reuters. Both accounts agree speech stated total CNC note circulation end March was 70 trillion, that Government gold and silver in hand Central Bank amounts US $110,000,000 and that total CNC note issue could be redeemed for [Page 368]US $110,000,000 at approximately current black market rate of 600,000 to 1. Apparently no reference made in speech to rate of increase in note issue, which of course has been steadily increasing past 2 years and may now be estimated at about 30 percent per month.

UP account reports speech to have stated that besides gold and silver, other assets include “additional US $290,000,000 in other Government assets including enemy property and Jap reparations and additional gold reserves of US $180,000,000”. UP despatch on financial assets concludes: “The Generalissimo said these figures taken together with the American loan12 totalled $1,000,000,000 in gold reserve which is 2 and ½times the amount Government has ever had before”.

Reuters despatch reads in part as follows on financial aspects:

“President Chiang said, ‘the economic foundation is not only not shattered but is even more secure than last year’, he said, adding that gold and silver reserves in the Central Bank are valued at US $110,000,000, while China had a reserve US $180,000,000 for foreign exchange. This makes a total reserve of US $290,000,000.

In addition, Government assets totalling US $400,000,000 can be used as currency backing. He attributed rising prices to Communist propaganda and not economic reasons and added that China’s holdings of US $1,000,000,000 can now be used as security against the note issue”.

[Casaday]
Cabot
  1. Chiang Kai-shek, President of the National Government of the Republic of China; inaugurated as President of the Republic of China on May 20, 1948.
  2. See telegram No. 638, April 9, 4 p.m., vol. vii, p. 187.
  3. Presumably assistance to be given China under the China Aid Act of 1948, approved April 3; 62 Stat. 158. For correspondence on this subject, see pp. 73 ff.