841.5151/463: Telegram
The Ambassador in the United Kingdom (Bingham) to the Secretary of State
[Received November 22—3:40 p.m.]
584. For Treasury from Butterworth. I have obtained under conditions of strict confidence from a reliable source, information that an instruction has recently been sent at Leith-Ross’ request by the British Treasury to Bewley,52 to explain to the American authorities something of Leith-Ross’ activities in China. It is pointed out therein that after the preliminary conversations Leith-Ross inquired (1) whether the Chinese were prepared to devalue or (2) whether they were prepared to peg to a foreign currency. When the answer was received that they were prepared to peg to sterling, Leith-Ross pointed out the necessity of a balanced budget, a strengthening in the Chinese banking system, et cetera. But before [the matter] could be properly gone into, action was taken by the Chinese (see my 566, November 12, 6 p.m.53). The instruction authorizes Bewley to point out the desirability [Page 646] of American cooperation and asks (1) whether the United States would take part in rendering foreign financial assistance to China; and (2) whether the United States would give China assurances of its willingness to purchase Chinese silver in the near and intermediate future.
I gather that the British authorities are disturbed at the course which events have taken, and that the divergence between the Foreign Office and British Treasury remains. This is reflected in the unusual concluding paragraph of today’s Times editorial on autonomy in North China:
“In these circumstances all that this country can usefully do is to press for two requirements. One is that any seceding province should admit and assume liability for its fair share of the Chinese foreign debt, a case in point being that of the loans secured on the customs revenue. In effect Manchukuo has repudiated these liabilities and every endeavor should be made to prevent a repetition of its virtual default. The second British requirement is equality of opportunity in Northern China. The ‘open door’ in Manchukuo has so far proved to be an exit rather than an entrance for British trade, and, though British interests in Northern China have little left to lose—owing primarily to Chinese misgovernment—that little is still well worth salvage. Finally it is to be hoped that some closer liaison will be established between the general trend of British diplomacy in the Far East and the well-meant attempt to give British assistance in reforming the finances of China. The sequel to Sir Frederick Leith-Ross’ mission suggests that it was a blunder to send a Treasury expert for this purpose to Nanking when neither the United States nor Japan nor France were prepared to follow suit. His mission was misinterpreted, it may be purposely, by the soldiers who are the real masters of Japan; but that misinterpretation might have been foreseen.”
I understand that the British authorities have approached the French and urged that the two Franco-Chinese banks give up their silver holdings to the Chinese Government at the internal price. Inasmuch as these banks have not used their privileges to issue currency notes, the French have refused to accept this suggestion.
I am told that Leith-Ross now would like to leave China, but inasmuch as he, and in a measure British prestige in China, have advertently or inadvertently become linked with the Chinese currency experiment, he does not feel free to depart under prevailing circumstances.
Foreign exchanges continue active and erratic. When the franc reached 751/16, the British control intervened vigorously and maintained the rate at 7415/16. Gold continues to flow from Paris to New York, and shipments from Holland to New York have also been effected. Gold at 141 shillings 3 pence; amount 120 bars. [Butterworth.]