893.515/1449
The British Embassy to the Department of State
Aide-Mémoire
His Majesty’s Embassy duly communicated to the Foreign Office the enquiry contained in the State Department’s note of July 15th as to the views of His Majesty’s Government in the United Kingdom regarding the effect which the imposition by the provisional regime in Peking, as from July 17th, of new export regulations was likely to have on British and other foreign banks in North China and as to the attitude which His Majesty’s Government felt it advisable for British banks to adopt in the light of this new development.
His Majesty’s Embassy has now been instructed to inform the State Department that in the view of His Majesty’s Government the effect of the new export regulations in North China must be to bring the business of foreign banks to a standstill and to give the Japanese a power to stop foreign trade in so far as it competes with Japanese trade. The general attitude of His Majesty’s Government is that, as at present advised, they see grave difficulty in finding any acceptable intermediate position between
- (a)
- complete surrender to the view that they must acquiesce in the elimination of British trade and interests in China and must assist Japanese in their anti-Chinese action, and
- (b)
- the refusal to contemplate any concessions of principle.
To give the Federal Reserve Bank currency legal tender in the British concession would, His Majesty’s Government feel, be held to be tantamount to recognition of the puppet government and inconsistent with His Majesty’s Government’s relations towards the legal government in China. His Majesty’s Government are informed that the British banks feel that they cannot reasonably be asked as a business proposition to hand over export bills to the Yokohama Bank at an artificial rate in anticipation of being given import exchange at the same rate since by so doing they would in effect be buying Federal Reserve Bank currency at a price far above its value without any security. The banks further point out that if the exchange regulations were relaxed so as to fall into line with those prevailing in Manchuria British trade and banks in North China would suffer the same fate as British trade and banks in Manchuria. His Majesty’s Government are also informed that the British Community in Tientsin have expressed the view that to give way on the questions of currency and silver reserves would jeopardize the currency, undermine Chinese resistance and give to the Japanese an even greater stranglehold on trade in North China than they now possess.
His Majesty’s Government feel that it is of the greatest importance that the American banks should adopt a common policy with the [Page 432] British and French banks and trust that the United States Government will be prepared to take whatever steps they can to ensure that such a common policy is maintained, more especially since, in the view of His Majesty’s Government, any other course will have very serious effects not only on the Chinese power of maintaining the war, but ultimately on all foreign trade and banking interests.
His Majesty’s Ambassador in Tokyo will keep the United States Chargé d’Affaires there fully informed in regard to any developments which may arise in regard to currency during his discussions with the Japanese Government, and due note has been taken of the readiness of the United States Government to offer such suggestions as it may deem to be helpful. In this connexion His Majesty’s Government trust that the United States Government will agree that it is very desirable that it should be made clear to the Japanese authorities, in whatever way the United States Government deem most appropriate, that the question of currency is, as stated in the State Department’s note under reference, of concern to the United States just as it is to the United Kingdom and France.
In regard to the related question of the silver reserves the view of the French Government, with which His Majesty’s Government agree, is that neither the banks nor the authorities of the respective Concessions at Tientsin can dispose of these deposits without the consent of the depositors and that the only satisfactory solution is to place the silver under seal, a solution which has already been discussed with the Chinese authorities very secretly, and to which they are prepared to agree. While His Majesty’s Government and the French Government are both directly concerned in this question, His Majesty’s Government presume that it is also of concern to the United States Government in view of the political and economic repercussions which the disposal of the silver must necessarily have. They would therefore be grateful to receive any observations which the United States Government may feel disposed to offer in this connexion.