893.61331/58: Telegram

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

457. Nanking’s 268, September 17, 5 p.m. The following telegram has been received from Shanghai:

“September 17, 11 a.m. Embassy’s telegram, September 12, noon.

From source referred to in my despatch 365, September 3,53 it has been learned that during course of recent informal conversation he had with Director General of Internal Revenue Administration, distinct impression was gained that Director General is under pressure from buyers to carry through the scheme and in particular to inaugurate the proposed semiofficial leaf tobacco company. In reply to a question, Director General stated he believed larger Chinese cigarette companies were in favor of the formation or [of?] such a company and added significantly ‘the smaller ones will fall in line.’
Also informed by above source that his company has learned from reliable sources that Commissioners of Finance and Reconstruction of Honan Province are in Shanghai trying to induce Internal Revenue Administration to agree to establishment of provincial monopolies of leaf tobacco or failing this a joint national provincial monopoly.
Lockhart states he is not in touch with those interested in this scheme and therefore has no inside information. He added, however, that present Minister of Finance is and has been an advocate of state monopolies and that he is undoubtedly pushing this and similar proposals.
Representatives of B.A.T.55 conferred September 15th with British Ambassador and other British officials and outlined their opposition to these proposals. They understand British authorities will make representations very shortly.”

It was stated at the Japanese Embassy yesterday that, although no formal protest had been made by the Japanese in regard to the tobacco monopoly, they were opposing the project and Suma56 at Nanking had on several occasions, in meeting with Chinese officials, taken the opportunity to make oral protest in the premises. The Embassy official stated that no changes of treaty provision had been made, the ojection being thus far based upon “practical considerations”, but that any changes would be made in the event of formal protest. It was further suggested by the official that a united front of Japanese, British and American interests would possibly prove effective in checking that monopoly project.

British Embassy officials in Nanking and Peiping are concerned regarding the project. It was stated at the British Embassy yesterday morning that the British Ambassador has informed the Foreign Office that the matter should be protested and that he proposed to confer with his American and Japanese colleagues in an effort to obtain their support.

It is my present reaction that, despite the obvious difficulties faced in resisting the formation of a domestic combine, as outlined by Peck, the Embassy should nevertheless take action directed against any monopolistic features of the proposed organization; although a sympathetic attitude should be adopted toward the efforts of the Chinese to strengthen their industrial and commercial enterprises, the weakness of their project due to financial and technical factors at the present time makes it improbable that those projects can be carried through to the general benefit of those concerned. In the particular case at point, where exclusive monopolistic features characterize the proposed organization, established American and British interests of considerable importance are threatened for ends which are still questionable. (The Japanese interests seem to be confined largely to [Page 619] certain drying plants, and perhaps mooted projects, in Shantung). It is therefore my belief that the American Government should endeavor to maintain the right of American commercial enterprises to coexist and function side by side with such experimental Chinese Government enterprises, pending such time as both the economic and political situations may have become more stabilized and a new agreement may have been reached regarding the function of foreign enterprise in China.

The Embassy proposes to wait several days for a reply to its note of June 1,57 and to see what line of action the British and Japanese propose to take.

By mail to Shanghai.

  1. Not printed.
  2. British-American Tobacco Co.
  3. Yakichiro Suma, First Secretary of the Japanese Embassy in China.
  4. Not printed.