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

No. 659

Sir: I have the honor to refer to the Embassy’s despatch No. 637 of August 10, 1936,42 with regard to the proposed establishment of a vegetable oil monopoly in China, and to enclose for the information of the Department copies of a note received from the Ministry of Foreign Affairs under date July 25 and despatch No. 320 of August 6, 1936, from the Consulate General at Hankow.43

It will be observed that the Minister for Foreign Affairs quotes the Ministry of Industry as stating that the establishment of the China Vegetable Oil Corporation is intended for the regulation of production and promotion of trade, and that no restrictions are imposed upon the legitimate commerce in tung-oil and other oil products;

“The legal commerce of the present enterprises of Chinese and foreign merchants may of course be carried on as they wish, and will not be subjected to restrictions.”

The despatch from the Hankow Consulate General points out the fact that the China Vegetable Oil Corporation plainly intends to engage, through the provision of financial facilities, in the sale, shipment and insurance of tung-oil belonging to its clients; and that, moreover, additional private plants may evidently be erected only with the permission of the Ministry of Industry. Consul Jarvis44 observes that it is obviously possible for the Government, while observing the letter of the assurances of the Minister of Industry to the delegation from the Hankow Chamber of Commerce, to drive foreign merchants out of business by the use of indirect methods; this the foreign merchants believe to be the intention of Mr. C. C. Chang, the Minister’s lieutenant, and as proof of this they point to Mr. Chang’s statement that he had received no new instructions from the Minister and was proceeding with the original plan.

Mr. Jarvis agrees with the opinion of the majority of the foreign merchants that the situation is unsatisfactory, especially in view of various statements made by Mr. Chang during a recent trip to Hankow. He suggests, therefore, that certain formal and specific assurances be obtained from the National Government for the protection of the interests of American tung-oil merchants. In view of the explicit character of the Foreign Minister’s assurances in his aforementioned note of July 25, the Embassy feels that, instead of sending another [Page 613] formal communication to the Foreign Office on essentially the same subject of policy, it would probably be preferable first to obtain informally an interpretation in detail of certain of the points under discussion. It is therefore requesting Counselor Peck, in an instruction under today’s date, to take up with the appropriate authorities at Nanking the matters discussed by Mr. Jarvis, and in particular to obtain the views of those authorities as regards the four items listed by Mr. Jarvis as being aspects of the problem requiring specific assurance from the National Government for the protection of American interests. Mr. Peck is also being requested to call to the attention of the Chinese authorities the circumstances, emphasized by Mr. Jarvis, that the National Government, contrary to the assertion of the Minister of Industry, has not endeavored to consult at all times with Chinese and foreign merchants with regard to its proposal to establish a vegetable oil monopoly. A copy of the Embassy’s instruction is enclosed.45

Respectfully yours,

Nelson Trusler Johnson
  1. Not printed.
  2. Neither printed.
  3. Robert Y. Jarvis, Consul at Hankow.
  4. Not printed.