893.50/205: Telegram
The Ambassador in China (Johnson) to the Secretary of State
[Received 10:48 a.m.]
530. In our conversation of October 18 (my 52693 and 528 of October 18 and October 20), the Generalissimo alluded to the gravity of the economic situation and the urgent needs of American economic assistance in order to prevent the situation from deteriorating further. I alluded to this problem in my telegram 502, October 4, 1 p.m.,94 paragraph numbered 3. I said there that an economic crisis had arisen owing to soaring prices, the fall in purchasing power, speculation, hoarding, lack of consumer commodities—all of which threatened to bring about an economic disequilibrium which might undermine the whole economic structure and thus endanger the continuation of the Sino-Japanese conflict. Although the Generalissimo in his conversation with me failed to elucidate on the nature of the economic ills confronting his Government, I feel that he undoubtedly made reference to the difficulties mentioned above. I believe he feels that the deterioration of economic conditions is largely a matter of the loss of public confidence, a decline in the people’s morale that can be checked only by positive economic assistance from the United [Page 677] States and Great Britain. Recent acts of hoarding and grumbling on the part of government employees who find it difficult to maintain themselves on their meager incomes in the face of rising prices are two manifestations of this problem. The extremely serious economic situation which prevailed in the early part of September has now eased to a certain degree, and I believe this is due in the main to favorable international developments—the new American loan, [deterioration?] of relations between the United States and Japan and the British reopening of the Burma route.
But the potential dangers remain.
Although the Generalissimo has not indicated what form American financial assistance should take, apart from the granting of a large lump sum loan which he stressed would buoy up the morale of the populace, I believe and strongly urge that the American Government should give earnest consideration to ways and means of bolstering the Chinese economic structure while the opportunity remains.