Office of the Historian

893.5151/9–2845: Telegram

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

Chungking, September 28, 1945—8 a.m.
[Received September 29—11 a.m.]

1677. For Secretary of Treasury from Casaday.

1.
With reference to proposed currency arrangements for American business firms in China, it is not clear from part 2 of your 1520, Sept. 21, 8 p.m., whether Pei’s proposal has been definitely accepted by the Treasury even “for the time being.” Does your instruction that I urge upon Pei the “necessity for immediate action in this field” mean that I shall urge immediate inauguration of the 500 to 1 rate with monthly limitation of $1000 U. S., or shall we continue to press for [Page 1160] a more favorable arrangement such as that used by the British channel and allowed the United Clearing Board? Your attention is called to the fact that arrangements permitting the sale of blocked dollars by United States business firms in China to reputable Chinese have never yet been approved by the Minister of Finance for free China although this is seemingly implied in the last sentence of part 2 your message.
2.
Embassy officials and Adler after his arrival have repeatedly urged the Minister of Finance to extend to American business interests facilities fully as favorable as those enjoyed by United Clearing Board and by the British (reference Embassy telegrams 1179, July 18, 3 p.m. and 1576, Sept. 13, 10 a.m.). As latter reference shows, the Minister accepted Treasury’s suggestion in principle but later reserved final decision pending Soong’s return.
3.
Arrangements for American businessmen under Pei’s proposal would be definitely inferior to those enjoyed by British business firms which obtain a rate roughly similar to that of United Clearing Board. Even in the recent exchange market reaction when the open market rate for dollar currency fell as low as 600 to 1, these rates have not fallen below 500. When dollar currency was selling at 2500 to 3000 in July, their rate was 1600 to 1800. Such rates are currently around 600 with open market currency rate at approximately 900. If, as may be expected under existing conditions of basic hyper-inflation, the open market rate for dollar currency resumes the markedly upward trend shown during the last months of the war, the disadvantage to American business of the fixed rate of 500 to 1 will become prohibitive and unjustifiable.
4.
For these reasons the Embassy feels that the Minister of Finance should not be urged to adopt the Pei proposal unless you have made definite commitments and specifically instruct me to do so. If Pei’s proposal is agreed upon we may be sure of an indignant protest from American business interests here unless a similar restriction is placed upon the British.
Adler is still in Shanghai. He is expected to return in a few days at which time your 1520 will be brought to his attention. [Casaday.]
Robertson