893.515/425: Telegram

The Minister in China (Johnson) to the Secretary of State

41. The Chinese Minister of Finance called on me February 26, 6 p.m., and described the increasing gravity of the monetary situation in Shanghai. He requested that I report the following points for the consideration of the American Government:

In December the Chinese Government engaged to sell to the American Government through Chase National and Federal Reserve Banks 19,000,000 ounces of silver for delivery during January and February now postponed to March and April. He states that if this silver is exported from Shanghai under present conditions another panic might be precipitated and if the silver is purchased in London [Page 544]in order to avoid shipment from Shanghai the loss to the Chinese Government will be about $5,000,000. Consequently, the Minister of Finance earnestly hopes that the American Government will permit the silver which it has purchased to remain in the vaults of the Chase National Bank in Shanghai at least until such time as it can safely be shipped from Shanghai.
The Minister of Finance expressed the earnest hope that the American Government would encourage the Chase National Bank and the National City Bank to import into Shanghai United States dollars 20,000,000 where it might be used to unfreeze capital now locked up in real estate and incidentally aid the two large American real estate companies there, the China Realty Company and the Asia Realty Company, which have large sums outstanding in loans secured on Shanghai real estate. If the credit referred to is extended, real estate values will become liquid, confidence will be restored, and the effect on the general monetary situation will be extremely beneficial. He said he would be willing to aid by extending the Government’s guarantee to such loans.
The Minister of Finance asked that I express to the American Government his very earnest hope that the Government will give the most serious consideration to the proposal which he says is now being considered by the American Government and a reply to which he is anxiously awaiting. He expressed doubt whether the American Government realizes the extreme gravity of the crisis in China caused, as is generally thought in this country, by the silver buying policy of the American Government.