893.24/1601: Telegram

The Chargé in China ( Atcheson ) to the Secretary of State

825. Embassy’s 790, May 26, 2 p.m., and Department’s 679, May 27, 6 p.m., Special Exchange Regulations. The two reference telegrams appear to have crossed each other.

Although we stated in our 790 that in the light of the clarification of article III of the regulations and in the absence of contrary instructions we assumed that we might take advantage of the new rate we have not done so because of the implication in paragraph 1 of Department’s 679 approving our original tentative provision taken before article III was clarified for us by Dr. Kung and by General Manager of Central Bank of China. We would accordingly appreciate receiving specific authority to avail ourselves of the financial advantages provided for by the new regulations, such authority, if granted, to include offices of the Military and Naval Attachés and the other official civil establishments such as BEW, OWI, and IDC35 pending outcome of reverse Lend-Lease negotiations.

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While the benefits to be enjoyed under the new exchange regulations are of a temporary nature only because the cost of living is rising at a rate of more than 10% a month and is expected to be accelerated as a result of the current Jap military operations in the Hunan-Hupeh area, the additional funds to be availed of under the regulations would materially lower the Government’s expenditures for rent, et cetera and would provide Government personnel with much desired financial relief. Also, use by us of the new arrangements would provide an opening wedge for a later and more satisfactory adjustment (through reverse Lend-Lease or a lowering of the official rate) of the exchange problem.

Instructions are urgently requested.

  1. Board of Economic Warfare, Office of War Information, and Interdepartmental Committee for Acquisition of Foreign Publications, respectively.