893.51/7479
The Ambassador in China (Gauss) to the Secretary of State
[Received May 4.]
Sir: I have the honor to transmit, for the information of the Department, certain material21 indicating the Chinese reaction to the recently concluded agreement for the loan of $500,000,000 to China.
As indicative of official Chinese publicity, there are enclosed:
Text of statement made by Dr. H. H. Kung, the Minister of Finance, to representatives of the Chinese and foreign press on March 24;
Report, released by the official Central News Agency, of remarks made by Dr. Kung at a press conference on March 24, regarding the uses to which the funds derived from the loan will be put.
In addition to these statements by the Minister of Finance, the press has given considerable space to regular news reports of the loan and has quoted the various telegrams exchanged between the concerned officials of the two Governments after the signing of the Agreement.
Editorial comment on the loan agreement has been made by almost all local newspapers, which without exception expressed China’s gratitude for the loan and praise for the spirit in which it was made. Most of this comment, however, has been rather vague in discussing the uses to which the funds should be put and the following two articles have been selected, not only because they are the views of influential papers, but because they appear the most reasoned and interesting: [Page 495]
Translation of editorial appearing in the Hsin Hua Jih Pao (Communist) of March 24, 1942;
Translation of editorial appearing in the Ta Kung Pao (Independent) of March 27, 1942.
Both articles express the fear that the additional credit made available by the intended domestic bond issues based on the loan may, unless more careful restrictions are imposed, have an inflationary effect opposite to that sought. In this they reflect a prevalent lack of confidence in the government’s fiscal policy. But from this point the viewpoints of the two papers diverge. The Ta Kung Pao, consistent with its long advocated policy which it calls “deflation”, lays the main emphasis on the monetary side of the problem, pointing out the dangers involved in considering the loan, and that from Great Britain, as a “reserve” for the Chinese currency, which although already greatly over-expanded hardly equals their face amount. In addition this paper believes that subscription to the proposed bonds by the well-to-do will have to be put on a compulsory basis, that the problem of hoarding should be attacked by the forced sale of hoarded stocks in exchange for bonds, and that use of the loan for stimulation of production must be most carefully controlled in order to avoid further inflationary effects. The Hsin Hua Jih Pao, on the other hand, believes that the question must be approached on a broader basis and that every possible means must be found to attack inflation and eliminate hoarding by increasing domestic production. It inferentially criticizes the sale of bonds redeemable in foreign currency as permitting the flight abroad of capital which would better be used in developing this domestic production. It is interesting to note that this paper, Communist in support, is the only one to insist that China should repay the loan.
Respectfully yours,
- Not printed.↩