693.002/408: Telegram
The Consul General at Shanghai (Gauss) to the Secretary of State
[Received December 1—3:20 p.m.]
1058. Reference to my No. 1047 of November 30, 8 p.m.,14 regarding Shanghai Customs. I saw the Japanese Consul General this afternoon and read to him the note communicated at Tokyo as quoted in the Department’s No. 582.15 He stated that he could inform me of developments and would consider any suggestions but that he could not undertake that the foreign representatives should be consulted before action is taken. He is now discussing with the Commissioner the question of supervision and he will later consider the question of foreign loan and indemnity quotas. He was not certain that the transfer of Japanese officers from the Chinese Customs Service to the Shanghai Customshouse would be sufficient supervision; something more may be necessary but it has not yet been decided. He did not say so but I surmise that as at Tientsin they may later appoint their own Chinese Superintendent of Customs. He admitted that the Commissioner had been instructed to open accounts in the Yokohama Specie Bank for the deposit of the revenues and said he could not see why there should be objection to this. I frankly pointed out that a similar restraint had been imposed at Tientsin and so far as I am aware there has been no remittance out of the Tientsin Japanese Bank of loan and indemnity quotas. He asked that the Shanghai issue be considered separately from the Tientsin case. I told him that under the circumstances this was rather difficult. He was adamant in his position that no other than a Japanese depository at Shanghai could be named and when I urged the desirability of considering some other arrangement perhaps one involving a group of banks including a Japanese bank he advanced various pointless arguments including one that the deposits in some banks might be used as security for loans to the Chinese Government; a suggestion which I dismissed with emphasis. He finally left me the impression that the military and navy insists upon a Japanese bank.
On the question of indemnity and loan quotas he seemed to think we should be satisfied with an assurance that they would be respected. I again pointed to the Tientsin situation and when I stated that I was not informed whether any formal assurance had been given by the Japanese Government he replied that it could be given.
I inquired whether the existing tariff would be continued. He hesitated and answered that he thought so.
[Page 894]He asked whether I had any suggestions or plan. I told him we were not proposing any particular plan but that it was the feeling that any arrangements made should carefully respect the American and other foreign interest in the integrity of the customs administration and revenues, and if it is the Japanese desire simply to ensure that any customs revenues from ports under Japanese occupation do not reach the Chinese for military purposes some arrangement might be discussed by him with the interested foreign representatives. Such arrangements I pointed out had existed previously. I also stated that in my study of the customs problem I had been interested to examine the extent to which China’s internal indebtedness is secured on the customs revenues and to estimate what effect a failure here to service such indebtedness might have on China’s banking, financial, and currency situation with reference both to China’s later rehabilitation and to the external business relations with foreign interests including the Japanese, and that in this connection I had been much interested and pleased to learn from the New York Times correspondent that General Matsui had disclosed to him yesterday a keen appreciation of this aspect of the problem and a desire that the financial and credit structure of the country should not be seriously affected. The Japanese Consul General said that this problem was being carefully studied.
He said that he had talked with Hall-Patch who had come to him with the British Consul General and that Hall-Patch had various plans which he would put forward. Our conversation closed with his statement that we would have a further discussion.
Sent to the Department. Repeated to Tokyo.16