Foreign Relations of the United States, 1949, The Far East: China, Volume IX

893.5151/6–849: Telegram

The Ambassador in China (Stuart) to the Secretary of State

Nanking, June 8, 1949—2 p. m.
[Received June 8—9:45 a. m.]

1239. Note foreign exchange regulations East China area, forwarded Shanghai’s 1974 to Department,⁹⁶ in contrast those for North China, significantly fail to mention time limit for “deposits”⁹⁷ with Bank China (BC) as called for Article 6. While BC itself might set limit, seems probable experience North China indicated time limit not feasible enforceable, especially Shanghai. Note also definition term “foreign exchange” Article 2 does not clearly include official Government funds, so that position Peiping Consulate General surrender rule not applicable Consulate official funds possibly also practicable for Consulate General Shanghai and Embassy.

Assistant manager Nanking PBC⁹⁸ told Embassy officer yesterday definitely illegal exchange US dollars with licensed silver dollar dealers, but forceful suppression illegal exchange activities will be gradual to prevent repetition Chiang Ching-kuo episode⁹⁹ as under Kmt.¹ Legal exchange thus only possible at PBC where Embassy is converting official and personally held US currency as needed at going rate. Circular to American staff has stressed embarrassment US and unhappy consequences if official American personnel arrested for BM² dealings and warned against use American notes in local market. PBC (official) rate, however, now little over two-thirds market rate. Yesterday PBC paid 770 PN to US$1, while BM around 1050.

PBC official also said instructions not yet received re new exchange measures and BC not yet prepared assume its responsibilities under measures. Said further while measures generally applicable here, supplementary rules adjusting them to local conditions will be issued by PBC or BC.

Think stage not yet reached Nanking where required pay alien or American staff PN only. Believe continuation present position time being, avoidance BM, watching carefully for announcements enforcement any new local rules, is indicated. Impression is that each foreign service establishment China will be confronted individual situation this regard based on local rulings, interpretations. Precedents laid down other parts Communist China helpful guides, but not necessarily proper solution each Consulate and Embassy.

Sent Department 1239, repeated Shanghai 666, Hankow 35.

Stuart

96. June 3, not printed.
97. Of foreign exchange.
98. People’s Bank of China.
99. General Chiang Ching-kuo, elder son of Generalissimo Chiang Kai-shek, was in charge of the situation at Shanghai in the autumn of 1948; see telegram No 2153, October 7, 1948, from the Consul General at Shanghai, Foreign Relations, 1948, vol. viii, p. 417.
1. Kuomintang (Nationalist Party).
2. Black market