Foreign Relations of the United States, 1949, The Far East: China, Volume IX

893.51/6–1649

Memorandum by Mr. Robert N. Magill, of the Division of Chinese Affairs, to the Director of the Office of Far Eastern Affairs (Butterworth)

[Washington,] June 16, 1949.

Subject: Chinese official foreign exchange assets

Our data on the above subject is far from exact, and that which we do have is subject to severe limitations on its use publicly because of the confidential character of its source.

If the House Committee hearings are open, I suggest that the subject be treated as follows, to which FN⁸ and Treasury agree:

1. Chinese official assets in the U.S.

Current data is not available because of its confidential nature. However, it is believed that net assets are negligible due to the probability that gross assets for the most part are offset by current liabilities.

2. Official gold and silver in China and Taiwan.

In February, 1948 the Dept obtained the permission of the Chinese Govt, to report to Congress that its gold holdings were (as of Jan. 1, 1948) $96.5 million and silver $30 million.⁹ The Chinese Govt, reported that its currency conversion in the fall of 1948 brought in over $100 million of gold and silver, mostly gold. Since official sales of gold during the last year and a half have been negligible, it is believed that gold holdings are likely to be in the neighborhood of at least $200 million. Silver holdings probably have declined sharply since the Govt, has been using silver in substantial quantities for currency.

The Govt. is reported to have moved the bulk of its gold stocks to Taiwan. Unofficial reports as to the total size of the stocks vary considerably, but some usually reliable sources estimate them as high as 5–6 million ounces, or between $175 to $210 million.

If the hearing is an executive session, it may be appropriate to add the following:

1. Gross official assets in the U.S. are reported to have been $102.5 million as of April 30, 1949. (We are checking with the Federal Reserve Board to see whether it is permissible to cite this figure on a confidential basis.)¹⁰

2. The Minister of Finance reported confidentially to our Embassy office in Canton on June 3, 1949¹¹ that total gold official holdings in China amounted to 3 million ounces, or approximately $100 million. There is reason to believe, however, that this may be a considerable understatement.

8. Division of Financial Affairs.
9. See memorandum of February 20, 1948, on economic assistance for China, Foreign Relations, 1948, vol. viii, p. 479.
10. Marginal notation: “FRB and Treas. say so.”
11. See telegram Cantel No. 523, p. 785.