Foreign Relations of the United States Diplomatic Papers, 1939, The Far East, Volume III

893.5151/605: Telegram

The Consul General at Tientsin (Caldwell) to the Secretary of State

Tientsin, June 7, 1939—2 p.m.
[Received June 7—9:45 a.m.]

82. Department’s 29, June 2, 5 p.m., repeated to this office by Peiping and Shanghai.

1. According to the best information obtainable, the only banks which have cooperated with the Federal Reserve Bank in handling at the official rate export bills for commodities subject to exchange and trade control measures are the Japanese banks. The German bank has denied that it is cooperating with the Federal Reserve Bank, but certain American and British bankers believe that the German bank here and in Peiping is working with the Yokohama Specie Bank on the “link system” as reported in my No. 806 of May 31 to the Embassy.⁶⁶

2. The position of American and other foreign banks has compelled all American and other foreign trading interests handling controlled exports to sell export bills to the Yokohama Specie Bank or to Japanese and German firms; or to sell telegraphic transfers exchange on New York or London (instead of export bills) to the Yokohama Specie Bank which immediately supplies in return an equivalent amount of foreign exchange for “preferred imports”. The Yokohama Specie Bank is reported to be exerting pressure on exporters for the sale of their export bills to Japanese firms rather than to the bank itself. The consensus of opinion is that the attitude of the foreign banks has perhaps curtailed business somewhat; that it has forced importers in some cases to finance “link transactions”; and that it has prevented exporters from obtaining freely from their own banks so-called “export packing credits” which are not obtainable from the Yokohama Specie Bank, Japanese or German firms, but which in some cases have been extended to regular clients by British and American banks regardless of their not having handled the exchange transactions. American and other foreign trading interests must continue to work through the Japanese banks or Japanese or German firms if they wish to do business, unless the American and other foreign banks alter their position.

3. It is not considered likely that continued non-cooperation of foreign banks will effect any important alteration of trade or exchange control measures or the value of the Federal Reserve Bank currency, although some (but not all) may consider that adoption of a policy of cooperation would probably cause some appreciation in the value of this currency.

Repeated to Peiping, Chungking, Shanghai.

Caldwell

66. Not printed.