103.91702/3783: Telegram
The Acting Secretary of State to the Ambassador in China (Gauss)
1565. The Department recognizes the urgent need for alleviating the critical situation outlined in your 1878, October 6 and previous telegrams in regard to the personal financial difficulties confronting Foreign Service officers and other civilian representatives of the Government as a result of rapidly rising living costs in China and the purely artificial exchange rate established under the Stabilization Board Agreement.54
[Page 569]The Department is still actively endeavoring to find means whereby cost of living allowances may be exempted from inclusion in taxable income.
Please approach the Minister of Finance informally and inform him that this Government regards as imperative Chinese cooperation in establishing, as soon as possible, an equitable and realistic basis for meeting the financial needs of American civilian establishments in China, either by implementation of the proposed reciprocal Lend-Lease agreement or by an adequate special exchange adjustment. Please add that in the meantime the Department has no alternative other than to authorize its diplomatic and consular officials in China to make use of the facilities now utilized by the United States Military Forces in obtaining required Chinese currency.
Effective immediately the Embassy and Consular establishments in China are authorized to sell drafts on the Secretary of State for salaries, allowances and operating expenses of the embassy and consular offices to the Army Post Office at Kunming for United States currency. This will permit payment of salaries and allowances in United States currency and payees will be permitted to acquire Chinese currency therewith by the most advantageous means available to them. Certificates required by Note 5, Section I–19, of the Foreign Service Regulations should invariably be submitted. Please report immediately whether the Army Post Office at Kunming is agreeable to and has sufficient United States currency on hand for encashment of aggregate drafts to be presented monthly.
Department desires exchange of official checks and drafts to be confined to the A. P. O. facility, with the object of keeping official American instruments of exchange out of questionable channels. Accordingly other methods of obtaining American cash dollars for the purpose of exchanging them for Chinese currency should not be resorted to without Department’s prior knowledge and approval.
Inform representatives of other agencies.
- See Treasury Department press release, April 25, 1941, Foreign Relations, 1941, vol. v, p. 633.↩