The Ambassador in China (Johnson) to the Secretary of State

No. 560

Sir: I have the honor to refer to the Embassy’s despatch No. 530 of June 18, 1936, with which there was enclosed a copy of the Embassy’s note of the same date addressed to the Ministry of Foreign Affairs protesting against the formation of the proposed vegetable oil monopoly, and to enclose a copy of a letter from Counselor Peck at Nanking, dated June 24, 1936,34 in which he recounts his conversation with an official of the Ministry of Foreign Affairs on the subject. It will be noted that Mr. Peck pointed out to that official that the Embassy’s note of protest should not be regarded as a formality, but as indicating a very real concern felt by the Embassy on behalf of [Page 610] the American businessmen concerned. There is also enclosed a copy of a memorandum of a conversation Mr. Peck had on June 24, 1936,35 with the Director of the National Bureau of Industrial Research and concurrently head of the Section of Industrial Planning and Promotion of the Ministry of Industry, at which time mention was made of the proposed vegetable oil monopoly. This official denied that the project is in effect a monopoly.

The Consulate General at Hankow continues to report the concern felt by the Hankow wood oil dealers that the project is in fact a monopoly which when established will eliminate them from the trade. There are enclosed copies of its despatches No. 302 of June 19, No. 304 of June 24, and 306 of June 26, 1936,36 on the subject. It is apparent that the Chinese wood oil dealers, as well as the foreign dealers, dislike the scheme, and also that some of the Provincial governments, which under the regulations are to supply part of the capital, are not enthusiastic about it. The conversations between the delegates of the Hankow Chamber of Commerce (Chinese) and the Minister of Industry, as reported in despatch No. 306, apparently had a beneficial effect and it appears that the Minister might now be more willing to consider the wishes of the wood oil dealers. However the Consulate General does not feel that the fundamental difficulties presented by the scheme have been solved by these conversations. It is hoped that the Embassy’s note of June 18 will help to bring about an abandonment, or at least a substantial modification of the scheme. The Department will be informed as soon as a reply to the Embassy’s note is received from the Ministry of Foreign Affairs.

Respectfully yours,

For the Ambassador:
George R. Merrell, Jr.

First Secretary of Embassy
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