393.1163/1288
The Ambassador in China (Gauss) to the Secretary of State
[Received April 20.]
Sir: As the Department is well aware, the American Christian missionary organizations in China, Protestant and Catholic, are experiencing serious hardship in endeavoring to finance their operations in this country at the arbitrary, artificial exchange rate fixed by the Chinese Government.
[Page 911]The official rate, originally $20 CN to $1.00 U. S., now carries a 100% supplement for the benefit of missionary institutions (making the rate actually CN$40 to U.S.$1.00). But the price indices show that all costs in China, in Chinese currency, have increased between 200 and 300 times since the first 6 months of 1937 (the pre-China Incident period), while in the open or “black” market, the U. S. dollar commands more than CN$200.
Representatives of the American missionary organizations in China, Catholic and Protestant, have repeatedly consulted me in reference to this situation, urging that the American Government find some means of ameliorating the situation so as to provide adequate Chinese currency for their mission work in this country. I know that the mission boards in the United States have done what they could by way of increasing their support of the field organizations; but the situation remains definitely unsatisfactory, and it has been reported to me that some of the smaller missionary organizations have had to cease operations in China, while the larger institutions have had to reduce their activities to a point where they are no longer effective or efficient. I am told that unless relief comes soon, a number of the American educational institutions and hospitals must cease functioning.
I have necessarily had to inform the American mission representatives concerned that no remedy for the unsatisfactory situation could be suggested by the Embassy. Several missionaries have told me that in conversations with the Minister of Finance the latter has at times shown considerable impatience in reference to their representations while on other occasions he has explosively asked the missionaries why they have not resorted to the “black market”. The mission institutions for the most part have felt that they must avoid all resort to the “black market”, and where one institution (Catholic) apparently experimented in this direction by arranging for remittances from the United States to India in rupees and the sale of rupees in the open or “black” market in China, they came into difficulties with our Treasury Department.
With the action of our Government several months ago in directing the use of U. S. currency for the personnel payments and expenses of our Government establishments in China (following the practice of the Army for several years in issuing pay and allowances to members of the U. S. military forces in U. S. currency in China), the pressure of the missionary element on the Embassy has increased, and I have been approached with proposals that U. S. currency be provided for such establishments, or that gold be shipped to China for sale for the benefit of the missions, or that goods be imported for sale for the benefit of the missions, to provide reasonably adequate funds to permit [Page 912] them to carry on their vitally important and helpful work in this country. I have necessarily had to point out to my visitors the impossibility or impracticability of resorting to any of the measures they propose.
Recently, Dr. E. H. Cressy, Associate Secretary General of The National Christian Council of China, representing most of the American Protestant missionary organizations, proposed to me that some measure of relief might be found for the mission organizations if arrangements could be made for the purchase in the United States of U. S. War Bonds and Savings Certificates, to be there held in the name of or in trust for Chinese purchasers in China who were willing to pay for them in Chinese currency to the mission organizations at rates more in line with the actual value of U. S. dollars in this country—rates substantially the equivalent of the resale price in China of the Chinese Government U. S. currency savings certificates and bonds issued with the backing of funds from the American half-billion dollar loan to China. (Such securities have been selling in China at rates between CN$100 to $165 to U. S. $1.00.)
Dr. Cressy informed me that a number of Chinese bankers and business men friendly to the American missionary organizations, appreciative of the splendid work they have done and are continuing to do for China, and desirous at the same time of making investments in the United States, had indicated a willingness to purchase such war bonds and war savings certificates of the American Government. Dr. Cressy asked whether I would find in this proposal a procedure which would be permissible under American and Chinese law and regulation.
I informed Dr. Cressy that on the question of the American attitude I must necessarily have to refer him through his mission boards in the United States, to the American Government, and on the Chinese side, he might do well to make informal inquiry at the Ministry of Finance. I stated that it was my opinion that the holdings of bonds and savings certificates in the United States on behalf of the Chinese purchasers would come under the “freezing” regulations of the Treasury. Dr. Cressy said that he believed that this situation would not deter the proposed Chinese purchasers. As to the Chinese side, Dr. Cressy has apparently consulted, informally and personally, various persons in the Ministry of Finance, and he believes that there will be no objection to the proposed procedure. He has so informed the mission boards in the United States, suggesting that the matter be taken up frankly with the appropriate American Government financial authorities, and that a test transaction be put through to determine the feasibility of the plan. Dr. Cressy tells me that the sale of some $800,000 U. S. in war bonds and war savings certificates [Page 913] has been indicated, already, as possible. The market in China for such securities is probably “thin”; it is by no means probable that sales could be made, under the existing conditions, sufficient to finance the whole of the American mission work in China, or even the Protestant mission work; but the plan would provide some immediate measure of relief.
I believe the Minister of Finance would be favorably disposed toward the American missionary organizations and would interpose no official objection to the plan proposed by Dr. Cressy, provided sales were not on a large scale and that they were conducted quietly and without publicity.
I am disposed to recommend to the Department that the Treasury give favorable consideration to the proposal with a view to assisting in finding some means of ameliorating the difficult position of the American missionary organizations in China at this time.87
The continued support of the missionary educational institutions, hospitals, orphanages, and social service agencies in China is vital to this country at this time. These institutions have rendered a service of tremendous value to China in the past; they will continue to do so in future if they are maintained; and they are an important element in good Sino-American relations.
Respectfully yours,
- In a memorandum of June 1, Paul F. McGuire of the Division of Financial and Monetary Affairs wrote: “It would appear that no reply is necessary at this late date since the missionary organizations, the United States Treasury Department, and the Chinese authorities have worked out a procedure for the sale of dollar drafts against blocked accounts. Operations are already under way and appear to be highly satisfactory to all concerned.”↩