893.516/599: Telegram
The Consul General at Shanghai (Gauss) to the Secretary of State
[Received May 10—7:45 a.m.]
367. Reference Department’s number 143, May 4, 1 p.m. It has been ascertained confidentially from the Customs that as of April 15 this year customs revenues deposited in the Yokohama Specie Bank or other Japanese banks totaled $199,056,000 Chinese national currency including the Chinese currency equivalent of 9,484,000 customs gold units. Of the grand total $95,830,000 is held at Shanghai, $80,000,000 at Tientsin and the balance at other small North and South China ports. The customs receive regularly from the Japanese banks statements of account verifying such deposits. Customs have no official information that any of the funds have been loaned or paid over to any puppet regime or otherwise disposed of or hypothecated nor have they any official information that the funds may have been converted into foreign exchange by the banks, the deposits and the bank obligations being in Chinese national currency.
- 2.
- Consul Smith of my staff recently had a conversation with Shimada, Commercial Secretary of the Japanese Embassy, who said that since about September of last year the Yokohama Specie Bank has been converting national currency funds into foreign exchange as rapidly as this could be done without disturbing the market, the bank wishing to hold its funds in a more secure form than national currency which might depreciate, the Chinese Government up to that time having paid its loan and indemnity obligations from other sources and there being little likelihood that the Anglo-Japanese customs arrangement47 would be implemented in the near future.
- 3.
- Asked whether there had been any loans against the customs funds and whether any portion of them had been expended, Shimada said that up to the present no loan has been made against funds representing [Page 403] the foreign loan quotas for the occupied ports; that there had been many requests for loans from the new Chinese Governments; but that while plans have been made for the utilization of surplus customs revenues over and above the foreign loan quotas, there has been very little if any actual expenditure from such funds and in no case would even the excess or surplus funds be expended except on carefully approved reconstruction projects.
- 4.
- It is not possible to reconcile the foregoing with the report that the “Provisional Government” at Peiping last year received customs revenues to the extent of $73,000,000 as stated in the Japanese press despatch cited in my telegram No. 319, April 28, 5 p.m.,48 nor with a report in the Chinese press that the Vice Minister of Finance of the “Reformed Government” at Nanking stated to the press on April 19 that the Reformed Government’s revenues are improving, the revenue from the customs now being $12,000,000 a month. These reports by the puppet regimes may have been meant for Chinese consumption. It is rather surprising that the Japanese should have allowed them to be circulated as they immediately raise questions as to the disposition being made of customs revenues.
- 5.
- The fact is however that the Japanese banks have received very heavy deposits of Chinese national currency from customs sources and they are able to use them in the same manner as deposits from any other source, for purchase of foreign exchange, loans to other banks or loans to puppet regimes. We cannot prove that any of the customs deposits have been so used but no observer here believes that the national currency deposits are lying idle in the Japanese banks.
- 6.
- The amount of foreign loan and indemnity quotas due from Japanese occupied ports figured by the customs on the same basis as quotas from Chinese ports is approximately 74,000,000 dollars Chinese currency.
Repeated to Chungking and Peiping. Code text by air mail to Tokyo.
- Signed at Tokyo, May 2, 1938; see telegram No. 584, April 26, 1938, 3 p.m., from the Consul General at Shanghai, Foreign Relations, 1938, vol. iii, p. 683.↩
- Not printed.↩