693.001/535
Memorandum of Conversation, by Mr. Joseph M. Jones of the Division of Far Eastern Affairs
| Participants: | Mr. Guy Holman, Assistant Vice President, National City Bank, New York |
| Mr. Hornbeck13 | |
| Mr. Livesey14 | |
| Mr. Straight14 | |
| Mr. Hamilton | |
| Mr. Jones |
. . . . . . . . . . . . . .
Mr. Hornbeck said that this Government had already made representations to the Japanese Government in regard to the exchange control and trade restrictions which were being imposed in north China and that our Embassy at Tokyo had been instructed to make renewed representations on this subject. Mr. Hornbeck stated also that we looked with favor upon the cooperative principle; that in the particular matter of resistance to the trade and exchange restrictions announced by the Japanese authorities it seemed desirable to us that the various foreign banks in north China, especially the American, British and French banks, keep in line with each other and maintain a common front. With regard to the question of one of the banks handling for one of its good customers an individual transaction, Mr. Hornbeck suggested that it would seem reasonable that the representatives in north China of the various banks get together and evolve some common and uniform procedure and practice. Mr. Hornbeck continued that the trend was toward greater willingness to protect national rights and interests abroad and that for obvious reasons a united front toward the Japanese was desirable and that action by American banks toward maintaining a solid front against the Japanese [Page 377] would be welcomed by this Government, although it was of course recognized that the bank had responsibilities of its own and had to protect its own interests.
Mr. Hamilton raised for discussion the complaints and implications which the Department has received from Chinese and other sources that the National City Bank is alleged to be inclined to cooperate with the Japanese and to tend to be non-cooperative with the Chinese. Mr. Holman indicated that he was well aware of these complaints. He said that when the Chinese Government raised the question in June of 1938 that the National City Bank was bearing down heavily upon the Chinese currency through sales in the Shanghai market, the National City Bank was able at that time to satisfy the Chinese Minister of Finance that the bank’s exchange operations had not been in any way abnormal. With reference to the recent action of the National City Bank in Tientsin and Peiping in withdrawing from depositors the option of withdrawing their accounts in any local currency, Mr. Holman said that the bank’s action was one of self-protection inasmuch as the bank had no idea what would happen to exchange rates and that in his opinion the other foreign banks were ill-advised not to have taken similar action. In regard to a recent complaint that the National City Bank was again bearing heavily on the Chinese currency through sales at Shanghai, Mr. Holman said that the National City Bank had made a study of the matter which indicated that during the past four months the National City Bank in China had been a net purchaser rather than seller of Chinese currency, and he stated that the rumor probably arose from the fact that the National City Bank shipped from Hong Kong to Shanghai certain stocks of Chinese Government notes which it had been holding since 1937 for Chinese Government banks. Mr. Hornbeck suggested that regardless of what might be the basis therefor the Chinese Government had had since 1932 the impression that the National City Bank was pro-Japanese and that it might be a good idea for Mr. Holman to place before the Chinese authorities the information which he had just presented to those at the conference in regard to the bank’s recent exchange operations so that the bank might be relieved of the charge of bearing down on Chinese currency.
In response to a question by Mr. Hamilton, Mr. Holman stated that in his opinion the proposed British loan to support the Chinese currency would undoubtedly have a strengthening effect upon the Chinese currency generally but that he did not think that it would materially affect the currency situation in north China.
During the conversation Mr. Holman indicated at a number of points that the National City Bank of New York had been keeping in close touch with the Chase Bank at New York (which has a branch [Page 378] at Tientsin) in regard to this whole situation. In reply to a question, Mr. Holman said that the Chase Bank knew of the interchange of telegrams of March 9 between Mr. Mackay at Tientsin and the National City Bank in New York; that the Chase Bank knew that he had planned to call at the Department this morning; and that upon his return to New York he would inform the Chase Bank of the discussion which had taken place here.
After the conversation reported above, Mr. Holman, in conversation with Mr. Hornbeck, said that some of his associates entertained the idea that, in the realm of policy in connection with the question of the “open door” in China, the most practical procedure would be for the interested governments to make their defense of the “open door” after the Chinese shall have regained control in China (implying that meanwhile any vigorous official efforts in defense of foreign—”open door”—interests in China should be suspended and opposing of the Japanese be avoided). Mr. Hornbeck replied that in our opinion such a deferring of the defense of the principle and practices of the “open door” might prove disastrous: anything which facilitates Japan’s operations must tend to decrease the likelihood of a regaining by the Chinese of control in China; if the Chinese are defeated and the Japanese acquire undisputed control, the “door” will, according to all present indications, be closed, and the chances of getting it opened again would be small; therefore, the tendency is to discourage courses of action which would increase the difficulties of the Chinese and be helpful to the Japanese. Mr. Holman said that the National City Bank was inclined to favor, in various international situations, the principle of proceeding with business when and where available, without being inhibited by too much consideration of “theorizings”.