The Secretary of State to the Chargé in China (Peck)
39. Your 107, February 16, noon, currencies in north China. The Department would prefer that you refrain from making further reply to the note quoted in your telegram under reference if you feel that you can appropriately do so.
The Department has been approached by the Chinese Embassy here in regard to the same matter. For your information, an officer of the Department in reply commented orally to the effect that, while it appreciates the considerations which gave rise to the Chinese Embassy’s approach and while the American authorities assuredly do not wish to take any steps which might affect unfavorably the Chinese banking and currency structure, there are a number of important [Page 365]problems arising from the abnormal conditions in the Far East which American banks must take into account; and that such banks have the responsibility of safeguarding themselves against losses due to the irregular currency situation. It was indicated also that the American authorities would not be in position to raise objection or express disapproval of such measures as the banks, after carefully weighing all the factors in the situation and the banks’ responsibilities in relation thereto, might adopt for their own protection.
In addition, the representative of the Chinese Embassy who brought the above matter to the Department’s attention said that, according to confidential information, the Japanese are planning a new bank, to be directed by Kodama, which will serve as a central bank with a capital of 100 million dollars. The new bank will issue currency and fix the foreign exchange rate at 8 pence. The Chinese Embassy expressed the belief that the Japanese hope to drive out Chinese currency with the note issue of the new bank. The Embassy representative stated that he was bringing the matter to the attention of the American authorities in the hope that the American Government would be able to do something toward preventing the establishment of such a currency either by refusing to deal in it or by causing American banks and American nationals to refuse to accept it. In reply to this point, the Department is informing the Chinese Embassy orally that the Department would make inquiry into the reported plans for the formation of a new bank and would continue its study of the situation.
Repeated to Peiping, Shanghai, and Tientsin.