893.5151/909: Telegram

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

157. TF–87 to Secretary of the Treasury from Adler. Re your 1284 of December 30.11

There is no specific information to indicate that Axis nationals or agents are benefiting from absence of restrictions on export of foreign currency from China.
Axis agents might take advantage of existence of black market to obtain foreign currencies therefrom and send it to India, but representative of Indian exchange control now visiting Chungking tells me that Indian authorities have no evidence that such has been done.
“Undesirable purposes” referred to include, firstly and chiefly, purchase of goods in India for hoarding against rising prices in India and, secondly, the possibility of financing Axis activities in India.
According to Ministry of Finance, Japanese have not hitherto been able to dispose of foreign currency looted in Shanghai for purchase of goods in and their export from Free China. Bank of China [at] Chungking informs me that, according to its reports from Shanghai, Japs are still eager to buy United States currency there and suggests that they may use it for purchases of goods from neutral countries.
According to Ministry of Finance, there are no intelligence reports to show that Japanese have obtained or are obtaining foreign currency from Free China.
There are no restrictions on imports of foreign currency into Free China save for the regulations fixing January 31 and October 10, 1942 as the final dates on which Hong Kong dollars and Burma rupees could be converted into fapi by refugees at the official rate at stipulated rates. In my opinion regulations on the lines suggested by Dr. Kung as reported in 2 of TF–8612 are needed in order to control movements of foreign currency. [Adler.]