893.5151/11–2348: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received November 24—4:17 a.m.]
2304. Embassy believes foreign exchange clearance certificate plan announced by Executive Yuan November 21 and transmitted verbatim in Embtel 2290 of November 2314 is constructive in conception. It should encourage exports now languishing and could contribute to increased domestic production by easing entrance needed spares and components. Crucial question is method of administration. If there is no loosening on grant of import licenses or if Central Bank intervenes itself in market for certificates, then artificially depressed demand for certificates can hold gold yuan value down to levels where incentive to export is lost as was case with abortive exchange surrender certificate plan of early summer. Another crucial question is extent to which Central Bank dollar reserves will be in fact released for imports and determination of rate at which such exchange will be sold for gold yuan. On balance Embassy mildly hopeful that this plan, as conscious move in direction free enterprise and realistic exchange rate, will produce benefits.
Embassy less hopeful of tangible benefits from Economic Coordination Board which is composed substantially same membership as CUSA15 which organization it largely overlaps. Operational Committee established under Board may provide executive coordination and drive but we find it difficult to believe that it can exercise more power than can be derived from the Board itself. Latter in turn is in effect a subcommittee of Executive Yuan which, for present at least, under Wong Wen-hao has ceased to function as a Cabinet.
Re Finance Minister’s16 statement17 it is obviously desirable to secure maximum coordination between ECA imports and those financed by Chinese. Implication that commodities from these two sources are being pooled may minutely nourish confidence.
[Page 436]Foregoing steps do represent energetic effort attack certain major problems of Chinese economy now nearly prostrate. Encouraging in their development has been constructive informal ECA advice and T. V. Soong’s intervention behind the scene.
Sent Department, repeated Shanghai for Lapham as 1152.