893.50/4–2949: Telegram
The Consul at Taipei (Edgar) to the Secretary of State
[Received April 30—9:42 a. m.]
133. Finance Commissioner Yen yesterday gave me unexpected 40-minute picture his economic and financial planning, producing statistics, charts, et cetera, asked comment, advice. Says conferences on details are daily. Governor hastened return from south due emergency situation.
Province has here in addition to national reserves over 2 million US gold, et cetera, backing and 5 million credit in Japan. Trade development 1947 and 1948 encouraging and expects favorable balance 34 million US 1949 from larger sugar export with subsequent greater emphasis rice culture. Saw little hope Oolong tea or camphor. Proposes make local currency freely convertible Jap occupation dollar to assure stability and encourage private Jap trade but cannot touch national gold for purely provisional purposes but its conversion to pay soldiers here in local currency would add to hard reserve. All above would permit later but early free convertibility US dollar.
Fully aware effect loss Shanghai as import-export market and entrepot. Says trade with China absolute necessity in addition good Jap market. Would divert from Shanghai to Fukien to Kwangtung as Communists advance. Also already negotiating British use Hong Kong as entrepot for later trade with Communist China. Trying get Governor make approach Tokyo but having difficulty due confusion Governor’s mind details SCAP trade practices. Also interested Manila but doubts volume. Desires discontinue government-to-government deals, encourage private trade use local bank clearings, retaining only minimum import control to insure receipt island needs. Hopes this will stimulate local business and reduce Taiwanese opposition.
Yen and Bureau directors seeking Government’s approval remove recording deficits like transport, utilities, provincial corporations and cut number excess Government employees. Governor reluctant believe [Page 322] low rates necessary to people’s welfare. Governor also ambitious industrialize island, unconvinced inflationary result, prefers industrial equipment imports to consumer goods and wants price controls, rationing, police measures. “Narrow and inflexible mind”, Yen expects eventual conversion but emphasizes need of patience.
Yen convinced useless attempt get outside support now but hopes later by development self-help. Says ECA could aid greatly but own program can start alone.
Sent Department 133, repeated Nanking 123, OffEmb Canton 19, Shanghai 115.