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

No. 692

Sir: I have the honor to refer to the Embassy’s despatch No. 659 of August 20, 1936, with regard to the proposed establishment of the China Vegetable-Oil Corporation, in which it was stated that Counselor Peck was being requested to take up with the appropriate Chinese authorities at Nanking the questions raised by the Hankow Consulate General in connection with certain monopolistic aspects of the organization’s program, and to enclose a copy of a despatch received from Mr. Peck under date August 26, 1936, in reply.45

It will be observed that, although Dr. Wong Wen-hao, Secretary-General of the Executive Yuan, in conversation with Mr. Peck expressed the opinion that the scheme which the Government is now attempting to carry out does not include any intention to limit in any way the activities of foreign merchants engaged in exporting vegetable-oils, his assurance seemed too general to be of any value as regards the points in which the tung-oil merchants are most interested—the storage and refining of oil-products and the financing of shipments, as well as the actual buying, sale and transportation of such products. [Page 614] The Embassy is therefore sending a new note to the Foreign Office under today’s date in an attempt to obtain official assurances that legitimate American trade in oil-products will not be excluded from the benefits of trade by the imposition of restrictions through the medium of an organization having exclusive and monopolistic characteristics. A copy of that note is enclosed for the information of the Department.47

There is also enclosed, as of possible interest in connection with the general subject of state control of industrial and commercial enterprises in China, a copy in English translation47 of an item appearing in the Central Daily News (semi-official Chinese-language organ, Nanking) under date July 3, 1936, reporting the convening on July 2 of the first meeting of the “Section for National Operation of Foreign Trade of the Central People’s Economic Planning Committee”. In this connection it is recalled that, as reported by the Assistant Commercial Attaché in report No. S–90 of May 25, 1936,48 page 3, some sentiment evidently exists in Chinese official circles for the adoption of state economic control and the elimination of so-called economic individualism. It is conceivable that, in the absence of political and economic distractions, the next few months will see definite developments in the direction of the state control of industrial and commercial enterprises. It seems probable that the Government leaders will be overly sanguine regarding the prospect of achieving favorable results from such a policy, so that they may perhaps be led to undertake enterprises beyond their technical and financial capacity, but this can hardly be expected to cause the eventual abandonment of the drive toward state control in China. If the present tendencies continue—and they probably will, barring the intrusion of elements of grave social disorder—apparently the best that individual foreign entrepreneurs can hope to retain is the right of co-existence side-by-side with state enterprises. China’s need for capital and modern technical skill will probably force at least temporary compromises of its program for complete state control, and the exercise of pressure from foreign commercial groups would be an additional factor of protection, under certain circumstances, for American trade interests in the country. It would appear, however, that the extension of Japan’s political control in China would constitute an immediate threat to various established commercial interests even if, by hypothesis, it were to be of general benefit to international trade in the long run.

Respectfully yours,

Nelson Trusler Johnson
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  4. Not found in Department files.