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technical aspect. We clearly had to close this gap in our exchange control as soon as possible, and politically we chose the best moment.

It has

Mr. Rogers, who was previously at the Bank of England, feels much aggrieved because we did not communicate these proposals to him beforehand. always been our policy to take Mr. Robers into our confidence so far as we properly can, and to obtain his advice. We had in fact intended to consult him earlier than we did but, on the one hand, Mr. Hall-Patch (who was to share the telegrams) joined him a week later than we had expected and, on the other hand, the public announcement of our assistance to China was made at the request of the Foreign Office earlier than we had anticipated. The net result was that we did not take Mr. Rogers into our confidence before the public announcement was made. I am sending him a personal telegram to attempt to soothe his feelings as he is an old friend of mine. We did not think it right to take Mr. Rogers into our confidence before we had announced to the Chinese Government our proposals for financial assistance, since Mr. Rogers is technically a servant of the Chinese Government, and it seemed to us that our proposals ought to be communicated to General Chang-kai-shek before they were communicated to anyone in Chinese Government service.

,

The one thing quite clear is that we cannot give up our proposed condition. Our Ambassador in China and Mr. Hell-Patch and Mr. Rogers do not know how dreadfully difficult our own dollar position is, and we certainly do not want to expose our real difficulties to the Chinese Government. In fact, our dollar difficulties are greater than those of China, for America is lending dollars to China but does not apparently intend to lend dollars (as opposed to weapons of war) to us. It is indeed fortunate that we are able to close the gap in our exchange control at a time when China is receiving dollars from America,

for we should certainly have had to close this gap in any case.

(Signed) S.D. Waley.

23rd December 1940

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