The Chargé in China ( Vincent ) to the Secretary of State
[Received May 12—9:40 a.m.]
692. To Secretary of the Treasury from Adler, TF–120. Re your 587, May 6, section 1. Following is translation of temporary measure concerning conversion of foreign exchange by foreign Embassies and consular bodies drafted by Ministry of Finance and communicated by it to Board on April 13.
- “1. For duration of war the conversion of foreign exchange into CN dollars by foreign Embassies and consular bodies for their expenditures will be at the official rate and in addition an amount equivalent to 50% of the proceeds in CN dollars will be paid.
- 2. The foreign exchange received from foreign Embassies and consular bodies will be put in a separate account with Central Bank and will not be credited to the account of Stabilization Board of China.
- 3. The CN dollars needed for foreign exchange converted by foreign Embassies and consular bodies will be temporarily advanced by [Page 536] Central Bank and be set off by the said foreign exchange. As soon as the war is over, settlement of the account will be made.
- 4. Conversions of such foreign exchange as mentioned above will be carried out by Central Bank on the basis of certified letters from the foreign Embassies and consular bodies.
- 5. Reports of the amounts of such conversions should be sent to the Ministry of Finance monthly by the Central Bank.[”]
Section 2, paragraph 1. Re your 587, paragraph 1. There is no information available other than that contained in paragraphs 2 and 3 above. It is not known whether Ministry of Finance contemplates a settlement of account involving reverse Lend-Lease as far as United States and United Kingdom are concerned or whether it contemplates a settlement between Ministry and Central Bank.
- Re your paragraph 2. Board in its reply to Ministry used following formula deliberately to avoid indicating approval or disapproval “the Board takes note of the proposal”. At same time Board is raising questions of detail concerning proposed new arrangement implied acceptance or consent in its reply.
- Re your paragraph 3. Neither Board nor I went on record as agreeing that 50% constitutes an adequate and reasonable compensation. At same time in existing circumstances I feel that extra 50% for diplomatic and consular bodies is better than nothing and can be regarded as opening wedge. Embassy officials with whom I have maintained contact on the matter do not disapprove of proposed arrangement.
- Re your paragraph 4. Chinese colleagues inform me that Generalissimo ordered Ministry of Finance to draft new arrangement as result of complaints lodged by smaller Embassies and Legations in Chungking. There is no further information to report on paragraph 2 of TF–118 of May 8 ,24 but if it turns out to be true that Minister of Finance has promised same concession to foreign philanthropic and missionary organizations then answer to your question would be affirmative.
- For your information proposed new arrangement with respect to foreign Embassies and consular bodies has not yet been adopted by Ministry of Finance and is not likely to go through before Dr. Kung’s return from Chengtu. Dr. Kung is expected back towards the end of this week. It is reported that principal purpose of his trip was to deal with complaints about conscription and the land tax. [Adler.]