Office of the Historian

893.516/601: Telegram

The Secretary of State to the Consul General at Shanghai (Gauss)

Washington, May 20, 1939—3 p.m.

174. Reference the Department’s 143, May 4, 1 p.m., your 347, May 4, 7 p.m., and Chungking’s 320, May 10, 2 p.m.59 and 323, May 10, 5 p.m.

1.
An officer of the Department on May 5 informed a representative of the National City Bank (and indirectly the Chase Bank) that the [Page 409] Department is interested in the position which American banks with branches in Shanghai propose to take in regard to the Huahsing Bank and its note issue; that it is our impression that the establishment of the new bank is an initial step in a Japanese program for the establishment in central China of financial and economic control similar to that which the Japanese have attempted to set up in north China; that it does not seem to the Department that advantage would accrue to American or other foreign banks through assisting the new bank in the launching of its note issue; and that, while the Department recognizes that American banks have responsibilities of their own and have to protect their own interests, the Department would welcome the maintenance by foreign banks in China of a united front against the new Japanese financial measures and hopes that American banks in central China will see their way clear to refraining from action which might assist the Japanese in establishing the new bank and launching the new currency.
2.
In reply, the representative of the National City Bank referred to certain past difficulties and misunderstandings between the Bank and the Chinese Government and said that the misunderstandings had been ironed out and the Bank desired that its activities be satisfactory to the Chinese Government; he made no conclusive statement regarding the position which the Bank will take in reference to the new Japanese financial measures, but he intimated that the Bank is leaving decision in regard to that matter, for the time being at least, to the Bank’s officials in China. Department is not informed regarding decision or current practices of the said officials.
We are in doubt whether National City and Chase have communicated to their branches in China the views expressed on behalf of the Department.
3.
The American Ambassador in Paris has reported that French banks in central China have been instructed to refuse to deal with the new bank.
4.
The Department desires that you inform the American banks in Shanghai orally and informally of the approach made by the Department to their home offices in New York, described in numbered paragraph 1 above.
5.
Please acquaint Ambassador Johnson fully with this matter upon his arrival in Shanghai. Should you and he decide that a further approach by the Ambassador to the officials of the American banks in Shanghai would be helpful and advisable, the Department authorizes the Ambassador to make such an approach.

Repeated to Chungking and Peiping. Shanghai please mail to Tokyo.

Hull
  1. Telegram No. 320 not printed.↩