893.516/642
Memorandum by Mr. Joseph M. Jones of the Division of Far Eastern Affairs44
The Department has been informed that there was established in Shanghai on May 1 a new bank known as the Huahsing Commercial Bank and that the Minister of Finance of the so-called “Reformed [Page 398] Government” at Nanking has been named as Governor of the bank. The details of the organization of the new bank are probably known to the National City Bank, but, in case the National City Bank would like to have the information which the Department has received on the subject, the details are as follows:
[Here follows summary based on telegrams received.]
The Department is naturally interested in the position which American banks with branches in Shanghai propose to take in regard to the new bank and its note issue. It is our impression that the establishment of the new bank is an initial step in a Japanese program for the establishment in central China of financial and economic control similar to that which the Japanese have attempted to set up in north China. It does not seem to the Department that advantage would accrue to American or other foreign banks through assisting the new bank in the launching of its note issue. Based on such information as is now available, the Department’s position in regard to the new currency developments in Shanghai is identical with its position in regard to the Japanese trade and exchange control measures in north China. This position was indicated to Mr. Holman in the discussion which he had on March 10 with officers of the Department. While we recognize that American banks have responsibilities of their own and have to protect their own interests, the Department would welcome the maintenance by foreign banks in China of a united front against the new Japanese financial measures and the Department hopes that American banks in central China will see their way clear to refraining from action which might assist the Japanese in establishing the new bank and launching the new currency.
Mr. Holman will recall that during the course of his conversation on March 10 with officers of the Department there was a discussion of complaints that the National City Bank was bearing heavily on the Chinese currency through sales at Shanghai. There has been received no complaint from the Chinese Government, but reports have been received by the Department that there has been in recent weeks a considerable drain of foreign exchange at Shanghai and that this has been due to buying by foreign banks in general. The Department of course has no information as to whether or not the foreign banks have been buying beyond their legitimate needs but we believe that the National City Bank would be interested in being informed of the reports which have come to the Department’s attention. The Department hopes that American banks will in so far as practicable refrain from action which would have the effect of weakening the position of Chinese Government currency.
In as much as Mr. Holman informed us when we talked with him on March 10 that the National City Bank was keeping in close touch [Page 399] with the Chase Bank in regard to the currency situation in north China and in as much as we assume that this is being done also in reference to the currency situation at Shanghai, the Department would appreciate it if Mr. Holman would be so good as to bring to the attention of the Chase Bank in New York the observations made to Mr. Holman, as set forth hereinbefore.
- Notation by the Adviser on Political Relations (Hornbeck): “Used as basis for statement made to Mr. Holman by ‘phone, V–5–39”. Mr. Holman represented the National City Bank of New York.↩