COPY OF CABLE TO BANK OF ENGLAND FROM MR.ROGERS, DATED 28TH AUGUST 1937
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Faragraph No.1
Confidential
Should the Japanese secure control of Shanghai area
as is most likely, difficulties with operations of Government
banks bound to arise. I think reasonable to expect no serious
interfering with purely banking operations including deposit
banks so that we may be able to keep banking system working to
supply currency credit foreign exchange and to prevent issue of
non-national bank notes. Should the Government banks continue
financing Government from their offices in the Concession pres-
sure very probable against which authorities in all probability
would not care to intervene.
Paragraph No.2 I therefore envisage
(a) removal possibly to Canton of those functions of Government banks as agents for Ministry of Finance i.e. revenue collection and accommodation
(b) confining purely banking operations to the Shanghai offices which would be converted into branches since branch accounts no longer could be passed through Shanghai.
Paragraph No.3 Head offices also would have to be removed. As it
is essential to preserve close contact with this market I think
of Hongkong as the centre for centralising banking policy.
Presence there of most foreign banks and branch offices of a
number of national banks would give the facilities in operation
so essential for monetary control.
Paragraph No.4 This is only way I see to keep things going and
would like you to consult Whitehall in strict confidence whether
such programme conflicts with their policy. Even if state of
war were to rule later on feel that provided that Government
agency functions strictly confined to the mainland as I should
insist upon non-objection to the direction of banking operations
from Hongkong would be best British contribution to maintenance
of financial stability of Shanghai.