The British Embassy to the Department of State78


There is good reason to believe that a new bank of issue in Central China may be set up by Wang Ching-Wei under Japanese auspices. The Chung Ya Bank, recently set up as a commercial institution, might well develop later as a bank of issue. Regulations were in fact promulgated and enforced by the Nanking Government on April 12th for the establishment of a Central Bank Preparatory Committee whose duties include measures for the reorganization of existing currencies and arrangements for the issue of a new currency.

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It has been suggested that British, United States, and French bankers should be encouraged to adopt a concerted policy in opposition to any new note issue sponsored by the Japanese. This would be the same attitude as was adopted towards the Federal Reserve Bank. The question has been discussed with the British eastern banks and they are prepared to fall in with this suggestion. His Majesty’s Government in the United Kingdom would be grateful to learn whether the United States Government would be prepared to encourage their banks to adopt a similar attitude.

His Majesty’s Government would also appreciate being informed whether the United States Government would be willing to make parallel representations secretly to Tokyo with His Majesty’s Government on this subject. There seem to be sufficient indications of an intention to set up a new bank of issue to warrant a warning being given in Tokyo as soon as possible. It is felt that if representations to the Japanese Government are made before the new bank is launched there may be a chance of stifling the whole project, but once it is launched, Japanese “face” will be involved and representations are likely to be in vain.

  1. Handed on April 24 to the Adviser on Political Relations (Hornbeck) by the Counselor of the British Embassy (Butler).