893.5151/7–1449
The Secretary of State to Mr. J. A. MacKay, Vice President of the National City Bank of New York
My Dear Mr. MacKay: The receipt is acknowledged of your letter dated July 14, 194951 concerning the possibility that the National City Bank of New York through its branch in Shanghai, China may be asked to assist in obtaining foreign exchange to be used to purchase commodities urgently needed in Shanghai, particularly fuel oil and cotton. It is understood that your inquiry relates specifically to the question whether the anticipated transactions might be contrary to United States law or antagonistic to the foreign policy of the United States, and not to business or financial risks which might be assumed by the National City Bank.
This letter is designed to confirm what may have been understood informally in conversations which officials of the Department have had with a representative of the National City Bank. The Department does not regard the proposed transaction described in your letter as being contrary to the present foreign policy of the United States. Moreover, the Department knows of no law or regulation of the United States Government which might be construed to prohibit the importation [Page 808] into the United States of currency or other negotiable instruments, or the establishment of credits in favor of persons domiciled in, or acting on behalf of principals in, Communist controlled areas of China. However, the Department can give no assurances as to future United States policy in this respect, nor can it take any responsibility for the legal and banking risks involved, such as the risk that the notes and other instruments may be claimed to have been unlawfully expropriated or the risk that the credits so established may be the subject of adverse claims.
The following additional considerations may help to clarify the problems confronting American banks having branches or correspondents in China.
- (1)
- The United States Government has not extended any manner of recognition to any political entity in China other than the National Government of the Republic of China with its capital at Canton.
- (2)
- The United States Government has no present plans for the freezing or blocking of any category of Chinese assets in the United States.
- (3)
- The Department of State would be willing to consider requests by the National Government of the Republic of China for the certification (under Section 25(b) of the Federal Reserve Act, as amended) of official Chinese assets in the United States.52
With respect to your inquiry as to the status of the Bank of China, New York Agency, it is the understanding of the Department that the Bank of China, New York Agency, continues to act as the agent of the Bank of China, the head office of which is at Canton. Officials of the Bank of China, Canton are reported to be confident that the Bank of China, New York Agency, will continue to be faithful to orders and instructions issued from the Bank’s offices in Canton and Hong Kong. You are undoubtedly aware that foreign branches of the Bank of China serve as fiscal agents for the National Government of the Republic of China, the Central Bank of China and other official agencies and instrumentalities of that government. It is possible that additional information concerning the status of the Bank of China, New York Agency, may be obtainable from the Commissioner of Banking of the State of New York.
It is trusted that the preceding provides the clarification requested in your letter of July 14, 1949.
Sincerely yours,
Director Office of Financial and Development Policy