Office of the Historian

893.51/8–645: Telegram

The Acting Secretary of State to the Ambassador in China (Hurley)

Washington, August 6, 1945—3 p.m.

1205. Re Emb’s despatch 460, June 6,5 with enclosure, and Instruction 162 of June 7, 1945.6 Suggest Emb consult with appropriate American officials regarding possible use of gold bullion as means of combating adverse effects of inflation and hoarding on Chinese war production.

Producers under contract with Chinese Govt. could be made preferred buyers of bullion under arrangement by which producers would be allowed to use all or part of contract payment to purchase bullion previously set aside for that purpose by Chinese Govt. Selling price of gold to producers could be official gold price existing at time of completion of contract, signing of contract, or an average thereof, depending upon whether govt. gold selling price continues as in past to be substantially below open market price.

[Page 1117]

Proposal would seem to have advantage of providing producer with hedge against inflation in that market price of gold tends to rise as purchasing power of Chinese currency declines. Producer also given opportunity to hoard gold rather than essential commodities. Chinese Govt’s. purpose of using gold to combat currency inflation not impaired and there is additional advantage of initially placing gold in hands of producers rather than speculators.

For Emb’s info Locke7 of Nelson Mission forwarded above suggestion to Jacobson8 after seeing Department inter-office memo proposing use of gold as outlined.

If Emb considers plan advantageous, Dept. suggests it be taken up informally with responsible Chinese officials.

[Grew]
  1. Post, p. 1428.↩
  2. Not printed.↩
  3. Edwin A. Locke, Jr., successor to Donald M. Nelson as Personnel Representative of President Truman and as head of the American Production Mission in China.↩
  4. James A. Jacobson, Deputy in charge of the American Production Mission.↩