893.51/12–947: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received December 9—3:32 a.m.]
2356. To State and Treasury from Embassy and Adler. ReDeptel 1419 [1441] of November 28. Exchange of letters between Governor [Page 1230] of Central Bank and Treasury Attaché covering current United States Government purchases of CN dollars and expenditures under article 6 b (2) of surplus war property agreement and between Ministry of Finance and Treasury Attaché covering expenditures under Fulbright Agreement concluded on December 8. Exchange of letters established a special rate to go into effect as of December 8 equal to 85% Hong Kong open market TT cross rate (selling) between U. S. dollars and CN dollars with procedure on lines of previous agreement in May. Hong Kong open market TT cross rate approximately same as Shanghai black market rate for U. S. currency, with former fluctuating sometimes slightly above and sometimes slightly below latter; there has not been any significant spread between the two in the last 3 months. Advantages of Hong Kong TT rate are:
- a.
- Open market for TT in Hong Kong much broader than black market for U. S. currency in Shanghai, quotations for which often show wide spread even at same hour of day and not always easily available especially when police drives active. Hong Kong open market TT cross rate also preferable to Hong Kong open market cross rate for U. S. currency both because market for former broader and because TT cross rate significantly higher than currency cross rate.
- b.
- Chinese object to official acknowledgment of any dealings at a rate which is a function of Shanghai black market rate.
Exchange of letters preceded by usual difficulties. Final stumbling block which delayed settlement until over weekend was Prime Minister’s reluctance to extend arrangement to Fulbright Agreement.
All Consular Officers and Army and Navy in China being notified of arrangement. [Embassy and Adler.]