Office of the Historian

102.1/5–247: Telegram

The Ambassador in China (Stuart) to the Secretary of State

Nanking, May 2, 1947—2 p.m.
[Received May 2—6 a.m.]

946. To Secretary of Treasury from Adler. At Embassy’s suggestion for appropriate distribution in Department.

1.
Called on Governor of Central Bank who was in Nanking for price control conference afternoon of May 1.
In discussing the price situation he asserted that the recent break in prices was inevitable given the continued inflationary pressures, as the emergency economic measures of February 16 were primarily political and did not change the underlying economic situation. The immediate causes of the recent rise in the price of rice were the lack of rain—fortunately now terminating—and the fact that the price controls in the various cities were not coordinated so that in some cases price of rice was higher in distributing than in receiving cities. Controls were accordingly being attenuated or removed outside Shanghai, while in Shanghai it was intended to relax somewhat military and police aspects of commodity controls. Asked how the [Page 1111] sale of Government bonds and treasury notes was proceeding, Governor replied that he was concentrating on sale of bonds for present and that he had had to use personal appeals to individuals to push their sale. He claimed that US $25 million of bonds will have been purchased by next week. With respect to treasury notes, he anticipated that they would sooner or later attract some speculative funds.
2.
Reference your telegram 473 of April 23 and Embassy’s telegram 914 of April 28, at Embassy’s suggestion had an exploratory talk with Governor pointing out that pressure of rising prices while official exchange rate remains stationary is creating serious problems for US Government agencies in China, and that this problem will become still more acute as prices continue to rise, and informing him of details of arrangement worked out with T. V. Soong and Tsuyee Pei, with which apparently he was not too familiar. For your information and again with Embassy’s consent, I made no request for any action. But such an exploratory talk was in any case an indispensable preliminary to formal request for action at appropriate time. [Adler.]
Stuart