893.51/8–1449: Telegram

The Chargé in China (Clark) to the Secretary of State

Cantel 942. Ho Ying-chin has been getting together with Minister Fin[ance] Hsu Kan, Cantel 924, August 11, repeated Nanking 610, Shanghai 490. Hsu called at his request and during two hours admitted Chinese Government past misdeeds and corruption which he blamed largely on inflation and the war, outlined dire Chinese needs, and assured me that if we could lend Chinese $40,000,000 per month, all would be well and Communists would be defeated under reinspired, well-paid armies led by Ho Ying-chin as commander in chief. He also perfectly willing try throw Generalissimo overboard and would welcome military mission help Ho reorganize and direct armies and financial mission to oversee expenditure loan. We could have any security for loan we could suggest. Failing loan, government resources, he said, at present rate of expenditures would be exhausted in 2 months.

When I asked why, if situation so desperate, he did not use Taiwan resources, he said he was in fact doing so, that it was those resources that will be exhausted in 2 months. (This is in contradiction Li Tsung-jen who says Generalissimo conserving resources to last 2 years, Cantel 918, August 10,71 Nanking 604, Shanghai 487.) Hsu denied vigorously that Taiwan resources were anywhere near $300,000,000, insisting that they comprise only 800,000 ounces gold set aside to stabilize Taiwan currency and 2,375,000 ounces gold on which he is currently drawing.

[Page 678]

Cautioning Hsu that there was little likelihood favorable reception his request for loan until Chinese Government had demonstrated that it offered alternative to Communists, I finally agreed [to] present proposal to Department for instructions. Hsu plans attend International Monetary Fund meetings in Washington mid-September and would like come little early and discuss loan in Washington if reaction his plea is favorable. Should appreciate Department’s early instruction.

Sent Department Cantel 942, repeated Nanking 621, Shanghai 493.

  1. Post, p. 1393.