2.
83
Section A of your telegram.
These proposals approximate closely to those I have for some
time, but without success, been urging upon Mr. Kato. The only new
suggestion appears to be custody of silver in a neutral bank, but I
believe this would make even less appeal to the Japanese than sealing
in Bank of Communications, Tientsin branch of which they hope will
before be absorbed by Federal Reserve Bank. But I still believe
and particularly since the outbreak of war - that Japan will insist
to the last on [grp. undec.] to Federal Reserve Bank (or Yokohama
Specie Bank), It is important that I should know, for my own inform-
ation, whether, in the changed situation of to-day, Your Lordship
would be prepared to contemplate this solution as a last resort on the understanding that silver would remain under seal, that ultimate decision as to silver would not be prejudiced, and that final disposal
would be settled by Chinese themselves after termination of hostilities.
In present delicate situation an unsuccessful resumption of negotiations might have disastrous results and I need guidance on this point to help in deciding whether or not any given moment is sufficiently favourable for reopening negotiations.
(Section B follows in my immediately following telegram).
Addressed to Foreign Office telegram No. 1162 of September 4th: repeated to Shanghai No. 940, Tientsin No. 301.