Office of the Historian

893.61331/96: Telegram

The First Secretary of Embassy in China (Salisbury) to the Secretary of State

Peiping, April 12, 1938—5 p.m.
[Received April 12—11 a.m.]

226. Tsingtao’s March 21, 5 p.m.97

1.
An American official of the Tientsin office of the Yee Tsoong Tobacco Company, Limited (B. A. T.—British registered) informed the Embassy April 11th in confidence that his firm expects within the next day or two to sign a contract with a representative of the Federal Reserve Bank and a Japanese officer for the purchase with foreign currency of Federal Reserve Bank notes totaling $9,000,000 for the purpose of buying tobacco in Shantung through the firm’s buyers, [Page 308] chiefly American citizens, that the quid pro quo is to be adequate protection by the Japanese military of the company’s buyers at four specified points on the Tsingtao–Tsinanfu Railway, that notes totaling $1,000,000 are to be purchased immediately, and that subsequent purchases will be contingent upon the adequacy of the protection given by the Japanese military. The Embassy’s informant stated that although the buying season is usually over by the end of February the condition of the tobacco will be satisfactory if purchase of the present harvested crop be completed before July 2. The firm’s buyers are to proceed to the railway stations of the four specified towns and are to reside in the stations, if necessary, under the protection of Japanese military. The official of the firm stated that he was fully cognizant of the possible danger to the buyers from guerrilla operations and that the firm does not propose to have its employees take unreasonable risks. He suggested that the American Consul at Tsingtao be directed to ask the Japanese authorities prior to the departure of the American buyers to afford adequate protection to them.
3.
[sic] Notwithstanding the facts that the contract is in the nature of a private agreement between a British firm and certain Chinese and Japanese authorities and that the travel of Americans to unsafe places should be discouraged, the Embassy is of the opinion that the Consul at Tsingtao should be instructed that after pointing out to the Americans concerned the possible risks involved in their intended travel he should ask the appropriate Japanese authorities that adequate protection be accorded by the Japanese military.
4.
If the purchase of the Federal Reserve Bank notes proceeds as planned it would appear that the position of the bank will be improved by its guaranteeing of a substantial amount of foreign exchange and by the wider circulation of the notes.

Repeated to Ambassador.

Salisbury
  1. Not printed.↩