FO371-24687 — Page 179

Page 179

Page 179

24. 12.40.

5679 176

15560/40

T. A.E. Formest.

CYPHER TELEGRAM

TO

O.A.G.

HONG KONG

Sent 24th December, 1940.

20.30 hrs.

IMMEDIATE.

SECRET

Page 179

10

104

Addressed Hong Kong No. 803.

Repeated Washington

No. 3713, and Chungking No. 339.

Begins.

F5678 F

140. within

Your telegrams Nos. 139 and 140.

Following from Treasury for Hall-Patch and Rogers.

1. We are most grateful for your views which we have carefully considered. We are most anxious to frame our programme and procedure in agreement with you and your friends,

2.

But it must be clear to you and to them that our choice of action is limited by two overriding considerations, namely that

(a) our own pressing need makes it impossible for us to provide any dollars whatever for China.

(b) the strategy of our exchange control makes it impossible for us to allow Chinese sterling to be available for use all the world over.

3. We cannot owing to our own situation supply dollars to China or continue to supply sterling convertible into dollars on a free market. It seemed to us that the appropriate moment to make the inevitable change was when the U.S. Government had decided to make a very considerable contribution to China's dollar needs. Surely this minimises both the economic and political effects of our ceasing to supply free sterling, and your fear of a severs fall in the U.S. dollar rate seems to

While take insufficient account of U.S. credits now offered. we recognise vital importance of checking inflationary rise of prices, the supply of dollars to this end must inevitably be the contribution of the U.S.A. and cannot be expected from us.

>

the As the Chinese Government clearly recognised, our decision to make available the currency loan and export credit was taken on political grounds. China has ample sterling to buy such supplies as we can provide in present circumstances, but besides being offered as a proof of good will, the additional sterling was meant to be available to China as and when the sterling area can provide more goods, Until then the intended implication was that it would remain held in sterling by the Chinese Government.

лов

fie

The T.

い

5.

Page 179

Page 179