The Ambassador in China (Gauss) to the Secretary of State
[Received 11:57 p.m.]
99. Representative Chase Bank informs me confidentially that according to reliable informed Chinese source following is outline of proposed legislation recommended to Legislative Yuan to govern foreign banks in China: Registration under Chinese law. Place of establishment to be specially designated by Government of China. Control and supervision to be exercised by Ministries of Finance and Economics. They may undertake following business: international exchange only with country of origin; make loans and discount bills; receive deposits only from persons of own nationality; sell Chinese Government and Chinese corporate bonds. They may not undertake internal exchange except amongst persons [of] own nationality; issue notes, savings bonds, et cetera; engage in storage or wharfage; provide for deposit facilities except for foreigners; engage in trust or realty business; buy or sell gold or silver; collect or pay money for customers except foreigners; or purchase or sell corporate shares except for foreigners.[Page 1043]
Bank representative commented American banks would not find it desirable to open branches in China under such restrictions.
Foregoing indicates present trend in Chinese thought regarding future foreign activities in China.
I am firmly of opinion China is not in position to undertake a closed or heavily restricted economy at this stage of her development. Her best future lies in liberal attitude toward foreign interests. I believe we should put China on notice as to our desires regarding future commercial relations by presenting draft commercial treaty9 drawn on liberal lines; also that we should propose consular convention10 ensuring most liberal consular treatment possible. Even if China should delay over long in accepting sound and liberal provisions of American drafts, I am confident that their presentation would have beneficial effect in restraining and diverting Chinese from formulating unfavorable legislation.