893.515/828: Telegram
The Second Secretary of Embassy in China (Atcheson) to the Secretary of State
Nanking, November 5, 1935—3
p.m.
[Received 10 p.m.]
[Received 10 p.m.]
57. My 41, October 31, noon.43
- 1.
- According to the same official the success of the Government’s currency program announced in the press yesterday depends largely upon the attitude and practice of the Japanese in regard thereto. Japanese press comments have not so far been favorably inclined but he thought the British representative had strengthened the Chinese position considerably and the Ministry of Finance hoped for American bankers’ cooperation and expected such cooperation from the Chase Bank but he was uncertain as to the attitude of the National City Bank of New York. Another element which he mentioned as determining is the extent to which the Chinese people, who are traditionally hoarders of silver bullion, will themselves cooperate. He said that if the Government could obtain control of 75% of the silver, it would be possible to maintain exchange at the level desired but control of only 50% would not be sufficient because there would remain too wide a field for speculators. He expressed fear that the Japanese might engage extensively in silver operations, including outward smuggling, and that the situation might resolve itself into a competition between the Chinese and Japanese banks which would be fatal to exchange stabilization. The Japanese Ambassador, he stated, had been consulted prior to the announcement of the Chinese Government’s program and had said that he would do what he could to be helpful but did not seem enthusiastic.
- 2.
- Suma has been officially quoted to me as saying the move is “worse than actual devaluation” and press reports from Canton indicate that the Chinese authorities there have at present no intention of falling in with the National Government’s plan unless the present currency situation there is affected naturally by the new financial factors. It appears at least superficially that the Chinese Government is pegging its dollar at a specific value in relation either to the American dollar (as the official in question on October 31 indicated would be the case), or to the pound sterling with a view to seeking parity with the Japanese yen or a value less than that of the yen. The yuan dollar-yen [Page 636] rate is today almost at par and the official stated that the Ministry of Finance desires a United States dollar rate of .28.
- 3.
- I have been given to understand by a well-informed source either (1) that the Chinese Government had planned this move for some time and before effectuating it consulted with Leith-Ross and the British Ambassador in order to obtain British cooperation, or (2) that Leith-Ross had made the suggestion and, for lack of any other concrete hopeful plan to meet the increasingly difficult financial situation, the Chinese Government adopted it with a view to obtaining British cooperation and as a quid pro quo for that cooperation by giving the British position in China more “face” than it had enjoyed since the “futility” of the Leith-Ross mission had become apparent. The speed with which the British Order in Council followed the Chinese Government’s announcement clearly indicates that prior consultation was had with the British.
- 4.
- Paraphrase to the Ambassador at Shanghai and Tokyo.
Atcheson
- Not printed.↩