Memorandum Prepared in the Department of State

The Commandant of the American Marines in Peiping has asked the Navy Department for instructions in regard to his acceptance of notes of the new Federated Reserve Bank established by the “Provisional Government” in Peiping. Pending instructions to the contrary, he proposes to negotiate his next bill of exchange on March 22 in notes of the Chinese national banks. Mr. Vining of the Supplies and Accounts Division of the Navy Department has asked Mr. Livesey10 of this Department informally for an opinion in the matter.

It is suggested that Mr. Vining be informed that:11

There would seem to be no warrant for interposing objection, on political grounds, to acceptance by the Commandant of the American Marines in Peiping of the new Federated Bank notes; the question of acceptance of the new notes, therefore, appears to be one of judgment by the Commandant as to the comparative value of the new notes for his purposes;
Recent information received by the Department indicates that neither Chinese nor foreign banks in Tientsin and Peiping are selling [Page 6] foreign exchange because of confusion with regard to the exchange value of the new currency, that according to the local press Tientsin and Peiping cotton dealers are refusing to accept the new notes, but that Chinese stores and exchange shops are accepting the new notes at par with the Chinese yen;
As long as there exist doubts as to the internal or external value of the new currency it will probably be possible to negotiate for Chinese national bank notes, as the Commandant proposes to do on March 22.

  1. Frederick Livesey, Assistant Adviser on International Economic Affairs.
  2. Mr. Vining was so informed on the same day.