102.1/4–1749: Telegram
The Consul General at Shanghai ( Cabot ) to the Secretary of State
[Received April 17—4:40 a. m.]
1215. For Treasury from Parker. Monetary and price situation Shanghai becoming progressively worse at increasing rate (see clear cables on rates past week53). Finance Minister called Ambassador morning April 16 with further report of impending financial crisis. Liu said he was thinking of resigning, confirming a rumor current past week. Asked Ambassador that US Treasury freeze all deposits Chinese nationals and identify them to Chinese Government. Was advised such action not possible.
During past few days various Central Bank officials have pressed for response to pending Chinese Government request to purchase 100,000 ounces gold. Although gold dumping is now less effective weapon against inflation than even few weeks ago, appears to be only device which offers any possibility maintaining semblance order in [Page 760] market. Consider advisable permit Chinese Government by using own resources attempt maintain currency and financial system until Communists assume responsibility Yangtze Valley area. Gold stocks now denied Li and Central Bank by Generalissimo will also be denied Communists and it is therefore doubted Communists can avoid currency collapse on take over. However, so long as cost to US not great our interest would seem to lie in avoiding collapse monetary system until Communists do take over or at least for next 2 or 3 weeks.
On this basis again urge approval Chinese Government gold sale request (Deptel 623, April 8) and possible subsequent requests but on basis avoiding accumulating stock Shanghai. Central Bank schedules gold sales now at average rate 15,000 ounces per day with occasional larger sprees. Will need gold on hand Shanghai about April 28 with earlier assurances arrival.54
Merchant concurs in above.
In this connection Toeca 1345, April 1355 represents special transaction connected EGA–RFC tin purchase proposal in Yunnan. Gold to be paid out by Central Bank now in Kunming branch and probably could not be brought to Shanghai in any event. Consideration this proposal should not prejudice consideration other request.
Request advice soonest.
Sent Department, repeated Nanking 695, OffEmb Canton 271, Taipei 69. [Parker.]