893.51/6933A: Telegram

The Secretary of State to the Ambassador in the United Kingdom (Kennedy)

510. Your 924, June 30, 10 p.m. With reference to Bewley’s comment that an exchange stabilization fund cannot operate successfully and at the same time give prior notice of its actions, the Department desires that you tell Bewley that it is our impression that American banks do not expect prior notice of the actions of the Stabilization Committee but that at the time of the recent change of exchange policy they felt that it would have involved no great difficulty for the Stabilization Committee to have informed American and other cooperating banks at the close of business on one day that the control would not operate on the next.

In regard to Rogers’ statement with respect to the operation of the Export-Import Bank’s credit which Bewley passed on to you, the Department desires that you inform Bewley orally and in strict confidence that in view of the fact that the Chinese Government is engaged in large scale hostilities and is obliged to make regularly large purchases of raw and manufactured products abroad, the provision that that half of the revenue of the Universal Trading Company (accruing from wood oil sales) which is not pledged for the service of the credit shall be used (after an allowance therefrom for reasonable operating expenses and reserves) for the purchase of American agricultural and manufactured products, can scarcely be considered a drain on China’s balance of payments. You may say that although the Universal Trading Company is pledged by its contract with its Chinese correspondent and with the Export-Import Bank to buy American agricultural and manufactured products with the unpledged revenue, the American Government has no control over the expenditure of that revenue and makes no stipulation in its regard other than the foregoing. Finally, you may say that in any case the surplus is small: Even at such time as the credit may be drawn on in full, the surplus will probably not exceed around $1,125,000 annually, out of which the entire expenses and reserve requirements of the Universal Trading Company must be met.

Referring to the statement on page 3 of your despatch No. 2857, June 14, 1939, that “the British Treasury asked in turn for information as to how far the Chinese have drawn upon the $25,000,000 American credit”, you may inform appropriate officials of the British Treasury in strict confidence that to date approximately $7,500,000 have been actually paid out, tho orders have been placed which will require substantially more.

Hull