Foreign Relations of the United States Diplomatic Papers, 1939, The Far East; The Near East and Africa, Volume IV

893.102 Tientsin/496

The British Embassy to the Department of State

Aide-Mémoire

Sir Robert Craigie has been instructed by the Foreign Office to endeavor to secure the conclusion of the Tientsin negotiations, and it has been left to his discretion to decide what to do and when. He will of course keep in close touch with his French and United States colleagues.

The sort of programme which His Majesty’s Government in the United Kingdom have in mind would be on the following lines:

A. The closure of the present conversations regarding Tientsin on the basis of

1. A police agreement.

2. Neutralizing the silver by sealing it until the end of hostilities or until some other amicable arrangement could be made.

3. Dropping of the Japanese F. A. P. I. proposal and acceptance in its place of a formula providing for the use of Federal Reserve Bank currency in the British Concession. This formula might be formed on a basis of (a) the elimination of any reference to the use of Chinese currency and (b) a statement that there is no intention on the part of the Concession authorities to obstruct the use of Federal Reserve Bank notes in the Concession.

4. Cessation of the blockade and anti-British agitation.

As regards the formula suggested under 3 above His Majesty’s Government trust that the United States Government will see no objection to the proposed formula, which merely recognizes a situation of fact, seeing that the Federal Reserve Bank currency has been used for months in the Concession in so far as its peculiar characteristic has not involved considering commercial laws, e. g. for the payment of taxes. While F. A. P. I. have some sort of convertibility and Federal Reserve Bank notes none, the latter should tend to be at a discount on the former and Chinese interests should be adequately safeguarded so long as no preferential treatment is accorded by British or other foreigners to Federal Reserve Bank notes. It would be helpful if the United States Government could see their way to agreeing to Sir Robert Craigie’s being authorized at the appropriate time to say that he understood that the United States Government had been made aware of the suggestion embodied in the above formula and had not expressed any objection.

B. The next stage envisaged would be informal discussions with the Japanese Government, in which it is hoped that the French and American Embassies would participate, as to taking practical methods for the clearing up of the economic and currency confusion in North China. His Majesty’s Government do not see how the proposals so far put forward by the Japanese would conduce to the end we all desire, i. e., the better ordering of currency and economic matters in North China, apart from the fact of these proposals being incompatible with genuine impartiality at which both the British and Japanese Government were aiming when it was agreed to hold the Tokyo conversations. These Japanese suggestions seem moreover to His Majesty’s Government only to touch the fringe of an exceedingly complicated situation which has arisen, and they wonder whether it might not be in the best interests of all concerned if in the first place some impartial technical experts in currency matters could be invited to study the situation on the spot and formulate recommendations for consideration by the Governments concerned. His Majesty’s Government will give sympathetic consideration to almost any constructive proposal which does not involve the impairment of China’s sovereign rights, e. g., taking currency control out of her hands and subjecting it to some sort of international control.

This consideration of economic difficulties might possibly create a situation in which

C. The Japanese and Chinese might begin the discussion of a peace settlement, and this in turn might pave the way to

D. Some sort of informal consideration of how the Washington Treaty might be brought up to date.

E. Finally perhaps formal conferences might be held approving the recommendations made under D.

His Majesty’s Government for their part would be ready to make all necessary sacrifices provided that others do the same to ensure a peace equitable both to Japan and to China. At the same time they will be ready to resume consideration of the projected discussion between Mr. Eden and M. Yoshida²⁸ in 1937 for a world wide Anglo-Japanese economic arrangement.

Washington , August 31, 1939.

28. British Secretary of State for Foreign Affairs and Japanese Ambassador in the United Kingdom, respectively.