893.515/1444: Telegram
The Consul General at Canton (Myers) to the Secretary of State
[Received September 17—7:45 a.m.]
On September 3, the Japanese authorities began a strict search of all Chinese entering or leaving Shameen and refused to let pass those carrying local or Hong Kong currency. On September 12, the restrictions on outward movements of currency from Shameen were removed but the inward movement of Hong Kong currency continued to be rigidly restricted. As a consequence the business of American firms, principally oil companies, has been greatly hampered and the business of National City Bank with Chinese clients has been practically stopped.
This office had discussions with the Japanese Consulate General on September 5th, 8th, and 13th. Throughout the Japanese failed to advance any convincing explanation of their action, alleging, however, that it is necessary to curb currency speculation. It is believed that the Japanese contemplate maintaining these restrictions for some time.
As a palliative Japanese military authorities proposed to the local office of Standard Oil Company that to avoid the restrictions its Chinese dealers in the city might pay their accounts through the Yokohama Specie Bank. The company has not agreed to the proposal.
It is believed that the purpose of the Japanese action is primarily to divert Hong Kong currency to the Japanese banks for foreign exchange purposes and secondarily to induce Chinese merchants to do business with Japanese agencies. Chinese hitherto have been dealing largely with non-Japanese foreign banks. On September 14, I appropriately protested to the Japanese Consul General against the imposition of restrictions on the free movement of Hong Kong currency between the city and Shameen, pointing out that it constituted an unwarranted infringement of the right of American firms freely to carry on legitimate business.
The matter is being reported by despatch, copy of which will be sent to the Department by air.8
The Embassy will be kept informed of developments. My British colleague has taken similar action and is reporting to his Embassy.
Sent to Peiping, repeated to Chungking.
- Not printed.↩