FO371-24687 — Page 25

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Minutes.

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and the Ministry of Finance know of Mr. Tani's proposal.

Rm.46

Tel. to Tokyom HAL

14th June, 1940.

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"A"

While some of the Japanese may now have genuine economic reasons for wishing to maintain the value of the Chinese currency (which their military authorities are still trying to destroy) one cannot disregard the possibility that this approach is a political manoeuvre designed, like so many others, to draw the democratic Powers into the position of co- operating with Japan for the settlement of Chinese affairs on the basis of the "new order". The proposal is in effect that the Japanese, British, American and French Governments shall set up a committee to evolve a scheme for the control of the Chinese national currency. may be taken for granted that in such a body the Japanese member would have the leading voice, while apparently the Chinese Government are to have no direct say in the matter.

It

Any scheme for stabilising the exchange value of the currency must obviously involve some control of the foreign exchange reserves on which the currency is secured. Those foreign exchange reserves are used by the Chinese Government not only as a backing for the currency but also for the purchase of munitions of war, and it is morally certain that they would not agree to part with their control to an international body on which they were not only not represented, but which was dominated by their enemies.

The manner in which this proposal is put to us tends moreover to increase one's suspicions of its motive. If the Japanese have a genuine financial scheme with some chance of acceptance by the other parties concerned, they should indicate in greater detail what their ideas are and advance them as their own. As usual, however, they want us to take the responsibility for a move that will immediately subject us to the gravest suspicion, while they remain at liberty to respond to it as they like.

It should be noted that a similar proposal was put forward by the Japanese some time ago

so/

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