893.5151/11–1248: Telegram
The Consul General at Shanghai (Cabot) to the Secretary of State
Shanghai, November 12, 1948—3
p.m.
[Received November 12—8:59 a.m.]
[Received November 12—8:59 a.m.]
2395. For State and Treasury from Casaday. ReContel 2287 to Department, repeated Nanking as 1731, November 2.
[Page 431]- 1.
- Formal confirmation our understanding never received from Central Bank owing partly Cabinet crisis and continued illness both Governor O. K. Yui and Acting Governor S. Y. Liu. However, on basis verbal confirmation given Merchant and Casaday by S. Y. Liu just before he became ill, we had been negotiating special rates for Army, Navy and State Department posts and actual purchases and remission of funds have taken place as follows:
[Here follows account of specific exchange rates obtained and related comments.]
- 2.
- On November 11 Consulate General Shanghai and all outposts received authorization from Embassy to be exercised at discretion local head of post, to acquire local currency requirements by sale US currency or drafts on best terms available or to pay individual, including alien staff, in US currency. Casaday instructed urgently inform S. Y. Liu or other responsible Central Bank official this decision. Since S. Y. Liu still sick, Casaday verbally informed Albert Shao afternoon November 11 who said he would inform S. Y. Liu at once.
- Shao apparently not surprised nor displeased at news. He said in fact such arrangement probably less embarrassing to Central Bank than prior arrangement which had caused Central Bank to become besieged with requests for “special” deals by other organizations, especially various United Nations groups, missionary organizations and other foreign Consulates and Embassies. Albert Shao said the Central Bank could truthfully say it did not have special deal with anybody and could disclaim any knowledge how American Government agencies acquiring their funds. He also said that in event individuals were paid in US currency perhaps Central Bank should take some step stop recent arrests of US agency employees or to secure their quick release if arrested.
- 3.
- However, Albert Shao said nothing about new official rate of 20 to 1 announced later last night and carried in press this morning. Under new regulations no longer illegal for people possess gold, silver and foreign currencies although still illegal to “deal” in same. (Summary new regulations being forwarded separately.6) Possibly Shao supposed US Government agencies would automatically support new official rate as we have done in similar circumstances in past but he said nothing about it and tone of conversation was otherwise.
- 4.
- Consulate General and Embassy assuming in absence instructions from Department to contrary, authorization granted in Embtel 1070 to Shanghai November 107 and Embcirtel same date8 still holds good. A priori no reason to suppose new rate, which definitely unrealistic at [Page 432] outset, will measurably reduce present chaos or for long retard process economic deterioration. Consequently, feel discretion given posts in this matter no less essential merely because of new official rate 2 days ago when authorization granted.
- 5.
- Uncertain whether verbal notification of authorization to make local arrangements given Central Bank yesterday by Casaday will be viewed by Central Bank as automatic abrogation of our October 29 understanding. Casaday assumes his notification likely to be so viewed by Central Bank which would mean Army, Navy and USEFC stuck with 20 to 1. Decided not press Central Bank today for its views on this matter nor on question in item number 3 above.
- 6.
- Understand Army, Navy requesting authority from Washington to make own arrangements locally similar that just issued by Embassy to State Department posts. No such possibility for USEFC, however, and seems likely we must endeavor continue or reestablish some specially negotiated arrangement for that organization.
Sent Department 2395, repeated Nanking 1814. [Casaday.]
Cabot