124.05/10–1048: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received October 21—2:29 a.m.]
1950. For Department and Treasury. Acting on authority contained Deptel 1459, October 15, repeated Shanghai as 1776, Casaday [Page 423] and Merchant called on Dr. Hsu Po-yuan, Acting Minister of Finance, on morning of October 19. In brief we told him that we had reluctantly reached the inescapable conclusion that the depreciation in the purchasing power of the gold yuan had now reached such a point that it was imperative the US Government receive a more realistic rate of conversion with respect to all official expenditures in China. Accordingly we stated that we were instructed to request a realistic rate for each post. For obvious reasons we stated that we would consider such a realistic rate the local open market rate and we left the impression that if we failed to reach an agreement along these lines we would be forced to make our own arrangements locally. Dr. Hsu was aware of the problem but emphasized its gravity to the Government and stated that the decision in all probability would be made by the Prime Minister. He promised to discuss the matter immediately with his Minister and Governor O. K. Yui of the Central Bank. He further expressed the hope that he would be able to give us an answer by the evening of October 20.
That same afternoon we discussed the problem with Dr. Tung Ling of Foreign Office and informed him of the opening of our negotiation with the Ministry of Finance. Tung appeared shocked that we felt the situation had reached the point where a special arrangement was considered necessary. He emphasized the blow to Government morale which acceding to our request would produce and beseeched us to consider waiting “a few more weeks” before pressing our request.
Not having heard from Dr. Hsu by late afternoon October 20, we telephoned him. He informed us that the matter was under most careful and serious consideration but that it would be impossible to give a reply until October 25 or 26. We asked him if an earlier answer would not be possible but he replied that while he would do his best he felt it was improbable.
After full discussion within the Embassy, it was thereupon decided that it would be tactically unwise to take any further action or approach the Prime Minister directly until after hearing Dr. Hsu’s reply the first of the week.
Sent Department, repeated Shanghai 963.