693.002/660: Telegram
The Ambassador in China (Johnson) to the Secretary of State
[Received May 23—7:55 a.m.]
263. Shanghai’s 680, May 18, 2 p.m. Young informs me that Minister of Finance learned only within last few days of deposit of Shanghai customs receipts with Hong Kong–Shanghai Bank which apparently represents an accumulation since last November. He states that this sum could rightly have been used for payment of loan obligations, but that as matter now stands Shanghai has made no contributions to loan obligations since November, Shanghai’s obligations having been met by an overdraft on the Central Bank. I understand customs agreement negotiated by British is not functioning, as Japan refuses to perform their part of agreement until Chinese turn over this balance. Young states that this sum now in Hong Kong–Shanghai Bank is causing some embarrassment in currency situation, as it has been used by bank in the form of loans, one of which was made to the Yokohama Specie Bank, thus increasing the amount of currency in circulation at Shanghai and softening the currency situation to that extent.
Repeated to Peiping and Shanghai. Shanghai please repeat to Tokyo.