102.1/4–749: Telegram

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

1112. For Treasury from Parker. China Press this morning announces 2 million ounces gold purchased Chinese Government to be airlifted from US. Assume this is garble of 1,000 [100,000?] ounces purchased and 1,000 [100,000?] ounces shipped from New York earmark. Other Chinese Government economic source reports Pei has secured $500 million silver loan. Assume here no action taken by Treasury except as reported Deptel 565, April 1 [March 31].

Ambassador has already advised Chinese Government denial stabilization loan. (See Nanking’s telegram 709 to Department April [6]).

Gold dumping by Central Bank April 4 seriously disrupted Shanghai economy with outport repercussions. While advance monetary rates temporarily checked, little, if any, effect on prices Shanghai where rice now selling just under gold yuan 200,000 per picul and in short supply, rise Shanghai 44% since first but in producing areas up to 80%.

On basis Deptel 565, March 31, assume no immediate action will be taken future gold sales. In any event request no sales be authorized until further advice from here. It is definitely my feeling Central Bank action April 4 unwise and Chinese Government should use foreign exchange resources commodity imports. Furthermore, consider unwise further depletion Chinese Government assets in US which are only assets potentially subject our control. [Parker.]