Foreign Relations of the United States, Diplomatic Papers, 1936, The Far East, Volume IV

893.515/1063

The Chief of the Division of Far Eastern Affairs (Hornbeck) to the Secretary of State

[Washington,] May 14, 1936.

Mr. Secretary: In the opinion of FE, the arrangement which the Treasury is prepared to consummate with the Chinese bankers, insofar as indicated and dealt with in the memoranda hereunder³² (which were read and explained to you by Mr. Taylor³³), may be regarded as satisfactory and gratifying.

With regard to the plan of the Treasury for an agreement—facts and terms of which not to be made public—for purchase of silver, it is believed that this Department will need to regard that matter as essentially Treasury business.

Our principal concern, of course, in both connections, is, as Mr. Phillips pointed out to Mr. Taylor, that of the political effects in the Far East, including the reactions of the British and the Japanese Governments. It is a definite feature of our Far Eastern policy at present that (1) we do not wish to inject new elements of irritation into that situation; (2) we do not wish to assume new responsibilities of initiative or leadership in regard to matters of general international interest in the Far East; (3) we favor cooperation with Great Britain and we do not wish to give Japan ground for a contention that she is being discriminated against or being deliberately left out in the cold. It is believed that the proposed arrangements in this case give no warrant for criticism or objection by the British and/or the Japanese. But, national and international susceptibilities being what they are, effort should be made in the handling of this matter to be as completely tactful as may be possible and to have the British and the Japanese Governments taken into confidence as far as may be practically possible. A suggestion along that line might perhaps to advantage be made to the Chinese.

Mr. Taylor tells me that, in case this Department wishes to offer any comments or suggestions, the Treasury Department would appreciate having word from us promptly. Might it not be well for Mr. Phillips or for me to inform Mr. Taylor of this Department’s views along the lines of the entries which I have made hereinabove.

S[tanley] K. H[ornbeck]

32. None printed; they dealt with “increasing the use of silver in China”, “increasing the liquidity of the cash reserve against note issues of the Chinese Government banks”, and “the question of the independence of the Chinese currency”. (893.515/1065–67)
33. Wayne Chatfield Taylor, Fiscal Assistant Secretary of the Treasury.