Office of the Historian

693.002/708: Telegram

The Consul General at Shanghai (Lockhart) to the Secretary of State

Shanghai, July 2, 1938—2 p.m.
[Received July 3—6 a.m.]

943. Department’s 418, June 30, 8 [6] p.m.

1.
The “items favorable to the Japanese” as the Japanese require shall be implemented in full before contributions will be made by Japanese controlled areas on loan payments are items 5 (a) and 5 (d) in the Anglo-Japanese arrangement.
2.
“5 (a)—The arrears on the Japanese portion of the Boxer indemnity held in a suspense account at the Hong Kong and Shanghai Bank since September 1937 shall be paid to the Japanese Government”. These arrears, according to the Financial Secretary of the Inspectorate General, on May 2, the date upon which the report was expected to be implemented, totaled £262,598 and 1 penny and today totals £328,247 10 shillings 1 penny, payment of which would cost $5,521,199.27 Chinese currency. With each month the agreement remains unimplemented, the amount in arrears under this item is increased by £32,824 and 15 shillings.
3.
“5 (d)—The balance of the customs accounts with the Hong Kong and Shanghai Bank in each port under Japanese occupation shall be transferred from the account of the Commissioner of Customs at the branch of the Yokohama Specie Bank in each port at which such a balance exists and utilized for future foreign loan quota payments”. The balance of customs accounts referred to under this item, according to the above-named authority, now totals $26,494,418.93. The Commercial Counselor of the British Embassy and the Financial Secretary of the Inspectorate General of Customs inform this office that the total amount to be paid from these balances to the Yokohama Specie Bank is subject to certain fixed payments [by?] the Chinese Government totaling $19,319,648.32 and also state that the Japanese authorities have agreed with the Inspector General of Customs that when they receive the check for the transfer envisaged in the same item they will legitimately redeposit with the Hong Kong and Shanghai Bank in the name of the Yokohama Specie Bank the amount of the balance left over from the transactions (which balance would amount to $7,174,770.61 according to the Financial Secretary’s figures), thus avoiding an actual transfer of funds from the Hong Kong and Shanghai Bank to the Yokohama Specie Bank.

Repeated to Hankow and Tokyo by mail to Peiping.

Lockhart