893.516/631: Telegram
The Ambassador in the United Kingdom (Kennedy) to the Secretary of State
[Received June 30—4:45 p.m.]
924. Your 479, June 23, 7 p.m. was duly communicated orally and informally to the British Foreign Office. In the course of a conversation today Bewley of the British Treasury stated that that matter had been referred by telegraph to Shanghai. At the same time he offered the personal comment that the first complaint (fourth paragraph of your 479) did not seem to him well founded in that an exchange stabilization fund could not operate successfully and at the same time give prior notice of its actions.
Bewley went on to say that while the spot squeezing tactics were having the desired effect Rogers was aware that a secondary danger might be created of involving some of the Chinese banks in difficulties. The British Ambassador in Shanghai had therefore been instructed to get in touch with his colleagues to the end that the gentlemen’s agreement of 1937 should be fully implemented.
He intimated that the Stabilization Fund had suffered considerable losses and that these technical tactics had been employed as the best available substitute for meeting the strain on the Chinese dollar which increased importations into China had recently accentuated. He went on to say that £10,000,000 was obviously too small a sum to reenforce a currency of a country the size of a continent at war and he cast out a hint that due to the necessity of aiding its newly found allies55 Great Britain was not in a position to give further financial aid to China except through the export credit schemes. He maintained that the British Government was prepared to render further aid in that way, the inference being America might consider contributing to the Stabilization Fund. However, he took pains not to make any specific suggestion.
Bewley also read an extract from a report of Rogers which he said he passed on for what it might be worth:
“The American-Chinese agreement provides for a schedule of wood oil shipments which will provide almost double the amount of the United States currency required to meet the service of the credit and this surplus is to be used to buy American manufactured products other than munitions. This blocks United States exchange which would otherwise accrue to the balance of payments.”
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