893.5151/8–744
The Ambassador in China (Gauss) to the Secretary of State 12
[Received August 29.]
Subject: Sale of U. S. Currency Exchange by American Missionary and Relief Organizations (Operating as the United Clearing Board) in the Open Market in Free China.
Sir: With reference to my despatch no. 2765 of July 14th [12th],13 on the above subject, and to despatch no. 2781 of July 18th, on the subject of “Exchange Transactions for Profit”, I have the honor to enclose copy of a memorandum dated July 28th,14 submitted to me by [Page 938] Mr. Irving S. Friedman, acting U. S. Treasury Representative at Chungking, reporting the operations of the United Clearing Board from June 7th through July 25th, 1944. It will be noted from this report that the Board has disposed of approximately $1,168,000 U. S. Currency, in checks and transfers. These sales were not sufficient to meet the financial requirements of the organizations concerned, and they were obliged to sell approximately US$465,000 through the Central Bank of China (at the official rate), in addition.
The lists appended to Mr. Friedman’s memorandum show the sales made by the Board; and they show that American Government civilian personnel in Chungking purchased checks and transfers to a total of US$24,000, while American military and naval personnel purchased checks and transfers to a total of US$50,000.
Amongst the American Government civilian personnel who made purchases were five Department of State–Embassy members … Other American Government civilian personnel who purchased checks or transfers were members of the Chungking office of O. W. I. (including … the Disbursing Officer for the war agency group) and members of the Foreign Economic Administration.
This information raises the question as to the propriety of such purchases by American Government personnel—military, naval and civilian—and I suggest that the matter have early consideration in Washington. I trust that the decisions made by the several Departments and agencies will be uniform as to both members of the armed services and civilian personnel; and I trust that amongst civilian personnel there will be no differentiation between personnel of the Foreign Service and personnel of the war agencies.
I may mention that the purchases made by members of the staff of the Embassy were so made before the issuance of my office memorandum and my circular to diplomatic and consular officers in China. The memorandum and circular mentioned were issued as soon as I had information that the United Clearing Board was making sales to Government personnel. I had no indication that Embassy personnel might be involved. I issued my office memorandum as a warning, in view of a report that war agency personnel were involved.
As I reported in my despatch no. 2765, I am of the opinion that if the Treasury Department were to indicate to the United Clearing Board that it disapproves the sale of checks and transfers to U. S. Government personnel—military, naval or civilian—for whom other provision has been made in China by the use of U. S. currency to meet their requirements—the result would be the discontinuance of such sales by the Board.
[Page 939]It is certain that in most cases involving American Government personnel the purchases represented exchange transactions for profit—by the sale of U. S. currency received as pay and allowances and reconversion of the Chinese currency proceeds of such sales into U. S. currency in the form of checks or transfers of the United Clearing Board.
While I believe that steps should be taken to stop these exchange transactions for profit—and stop them, uniformly, both as to the armed forces and civilian personnel—there is one exception which should be made where a liberal attitude, under proper controls would afford relief in a difficult situation.
Up to July 1st of this year, it was possible for Government personnel in China leaving the country on transfer, resignation, etc., to obtain U. S. currency exchange in the form of bank drafts through the Central Bank of China at the official exchange rate. Since July 1st, however, it is not possible to obtain such exchange.
It is now possible to leave China only by air transport, and the baggage allowance (15 kilos) is insufficient to take out the personal effects of an officer or employee leaving the country. Even where excess baggage might be paid for, it is not possible to arrange for its transport. Thus, persons leaving Chungking are obliged to dispose of their personal and household effects. They can usually sell them to those unfortunates who are obliged to remain in Chungking or to Chinese; there is a ready market for such sales. But, since July 1st, it is not possible to convert the proceeds of such sales and any reasonable savings or surplus in Chinese currency, into U. S. currency drafts.
In order to meet this situation, I recommend that American Government personnel about to leave China, on transfer, resignation, etc., be permitted to purchase U. C. B. checks and transfers representing reasonable savings and surplus funds and funds from the sale of their household and personal effects. If other sales of U. C. B. checks and transfers to Government personnel are interdicted, the exception suggested might be arranged by approval to the U. C. B. of applications from Government personnel by the heads of offices or commanding officers certifying that the person concerned is leaving China and that satisfactory proof has been presented to show that the transaction applied for does not represent an exchange transaction for profit.
. . . . . . . . . . . . . .
Respectfully yours,
- In letters of September 30 to the heads of the Foreign Economic Administration, the Office of Strategic Services, and the Office of War Information, the Secretary of State, after quoting from this despatch made the following comment: “I am confident that you will agree with me that the exchange transactions mentioned above are clearly speculative in nature and have been made solely for personal profit of the individuals concerned. It is thought that you may wish to issue instructions to your personnel in China similar to those issued by the Ambassador to State Department personnel.” A letter of the same date to the Secretary of the Treasury enclosed a copy of the letter to the Foreign Economic Administration. Copies of despatch No. 2781, July 18, p. 934, were also sent to the agencies mentioned above.↩
- Missing from Department files.↩
- Not printed.↩