893.516/590: Telegram
The Consul General at Shanghai (Gauss) to the Secretary of State
[Received April 28—10:20 a.m.]
316. The Counselor of the Japanese Embassy called on me yesterday afternoon, in the absence of any American Embassy representative [Page 395] here, and informed me that the “Reformed Government” is establishing a bank to be known as the Huahsing Commercial Bank with head office at Shanghai and branch offices at “important places”; capital to be $50,000,000 fully paid up; bank to deal in foreign exchange, general banking business, and to issue bank notes convertible to foreign currency and to national currency; reserves to be (1) foreign currency, (2) gold and silver, (3) prime foreign exchange bills, and (4) bills on export advances. The amount of the first three items of reserves to be not less than 60% of the amount of the notes issued. One half of the capital is to be paid in by Japanese banks and the other half by the Reform Government. (He later said that the latter half will be loaned by Japanese banks to the “Reform Government” for the purpose.) A Japanese named Washio, formerly a director of the Yokohama Specie Bank and later a director of the “Manchukuo” Central Bank, will be vice president of the new bank. He did not disclose who will head the bank. He said that Washio is now calling on the managers of the foreign banks at Shanghai to inform them of the plans and to endeavor to arrange for the acceptance of the bank notes of the new bank, it being proposed to make deposits of national currency in the several foreign banks to secure them in such acceptance. Bank is to be established May 1st but will not begin operating until later.
The Counselor of Embassy asserted that the new bank notes are to have the same value as national currency and are to be convertible into national currency and foreign currencies. He denies any intention to set up a new currency in this area and in reply to a blunt question said there was no intention to control exports or foreign export credits, but I accept these statements with considerable reserve.
Consulate General will report developments and local bank reactions.
Repeated to Chungking and Peiping; by air mail to Tokyo, mail to Nanking.