893.515/0–349: Telegram
The Minister-Counselor of Embassy in China (Clark) to the Secretary of State
[Received 7:54 p. m.]
Cantel 523. Following emerges from long conversation with S. Y. Liu, Minister Finance, yesterday:
Meeting with Generalissimo end May resulted in delegation obtaining satisfactory dispensation Taiwan-Amoy treasure for purpose financing new currency issue (Cantel 498, May 29). Total treasure said [to be] 3 million ounces gold with unimportant amounts silver and foreign exchange.
New currency program will not be introduced for at least week or more. Enhancing reason given is urgent need 5 million silver dollars minted Philadelphia for which US military air lift requested Cantel 519, June 20 [2].
Biggest drawback to currency program is that practically all Government reserves in gold bullion which not be utilized for purchase silver. Mexico insists on US dollar payment only. Chinese Government already started minting gold coins at Hong Kong in preparation “redeemable in gold or silver” feature of new program. Liu stated large parts gold bullion reserves would be converted to coin.
Central Bank apparently desperate dollar funds for silver purchases and exploring every possible means raise US dollars 7 million for planned second Mexican purchase. Central Bank attempted raise loan against gold on deposit with Federal Reserve Bank New York but was refused on technical grounds. Minister Finance now exploring possibility show US Government still owing Chinese Government some US dollars 50 million in reverse lend-lease funds. Central Bank representatives now in Hong Kong for purpose check BOSEY95 and other records in order obtain substantiating information. We have taken cold view entire scheme.
Liu again aired plea for US 100 million loan to tide Nationalist Government over critical financial straits.
Apparently Nationalist vision maintain some kind South or Southwest China autonomy expected hold out against Communists. Liu characteristically speaks of “miracles”. Budget target would be 30 million silver dollars monthly for military and Government expenses. Loan of any kind, Liu says, would be partially used for desired reduction two-thirds Government payroll which impossible now due lack funds meet 3 months’ severance pay requirements.
[Page 786]Whole conversation characterized by air desperate optimism, unrealistic thinking and repeated fears US Government closing door on moral support Nationalist cause.
- Board of Supplies of the Executive Yuan.↩