893.515/1545c: Telegram

The Secretary of State to the Ambassador in China ( Gauss )

23. Your 1476, December 11.2 For Adler3 from Secretary of the Treasury.4 Reference your TF–745 and TF–75 continuing TF–74, December 11, 1942.

1.
In connection with question of purchase of U. S. dollar-backed certificates by persons normally resident in United States now in China and importing them or checks or drafts issued in lieu of or in exchange for such certificates, and in connection with question of purchase of such savings certificates by foreign business houses with fapi acquired in normal course of business, Treasury’s views are as follows:
(a)
Treasury is reluctant to place restrictions on the import into the United States of such certificates or checks or drafts or to consider requesting American citizens in China not to purchase such certificates or checks or drafts, until China has taken steps to restrict their purchase by foreigners and foreign business organizations and their export to the United States.
(b)
Treasury will consider aiding China to enforce restrictions on sale or export of such certificates by foreigners or foreign business concerns, but Treasury feels that it cannot take such measures independently of, or as a substitute for, measures by China.
2.
Treasury feels that steps should be taken to prevent sale of U. S. dollar-backed certificates or bonds from being used as a means of facilitating flight of foreign capital from Free China. Treasury does not feel that there is any basic difference between transient [Page 402] Americans or other transient foreigners in China or American or other foreign business houses. It would be embarrassing to Treasury to explain to American public the use of American granted funds to facilitate the flight of foreign capital from China. To permit foreigners and foreign business concerns in China to purchase directly or indirectly U. S. dollar-backed certificates or bonds would seem not to be within the spirit of the $500 million financial aid which was given to aid China6 and the Chinese people and not given to provide foreigners or foreign business concerns in China with opportunity to convert their assets into U. S. dollars.
3.
It is feeling here that in case of Chinese purchasers, China continues to have ultimate jurisdiction and control over U. S. dollar proceeds, but that this would not be true in the cases of purchases by foreigners or foreign business houses. Treasury can understand China’s reluctance to prevent export of bonds, etc., held by Chinese. Treasury freezing controls, however, can be employed so as to freeze all such bonds, etc., in hands of Chinese sending same to the U. S. so that China may continue to control these assets. This action would not require export restrictions by China. Does China want Treasury to take such action?
4.
The Treasury is considering the other various questions raised by you in your cable and will send a reply on such questions as soon as possible. [Morgenthau.]
Hull
  1. Ibid., p. 558.
  2. Solomon Adler, Treasury Department Economic Adviser to the United States member of the Chinese Stabilization Board, September 1941–February 1943; United States member of the Chinese Stabilization Board, February 1943 to March 1944.
  3. Henry Morgenthau, Jr.
  4. Telegram No. 1475, December 11, 1942, not printed; but see Foreign Relations, 1942, China, p. 558, footnote 4.
  5. For correspondence on this subject, see Foreign Relations, 1942, China, pp. 419 ff; for text of agreement signed March 21, 1942, see Department of State Bulletin, March 28, 1942, p. 263, or United States Relations With China, p. 510.