893.811/1036: Telegram
The Second Secretary of Embassy in China (Smyth) to the Secretary of State
[Received 3:10 p.m.]
186. My 184, November 16, 4 p.m.30 The American representative of an American oil firm and responsible Chinese businessmen here state that considerable quantities of commercial freight, principally Japanese, are arriving here from Shanghai by Chinese merchant vessels and Japanese lighters. These men have not kept detailed records of import and export cargoes (as have been done by the British shipping agents mentioned in my 158, September 8, 9 p.m.31 and 184, November 16, 4 p.m.) but they have given careful study to shipping and they believe that commercial shipments make up an average of between 30 and 40% of the cargoes carried by Japanese commercial vessels and lighters arriving here from Shanghai. They add that on down river trips the cargoes of these vessels consist almost entirely of commercial exports from this area.
In this connection it should be mentioned that on July 31 there were 1514 Japanese civilians and 172 Japanese shops in Nanking. A few days ago the Japanese Consul General informed me that there were now approximately 3000 Japanese civilians in Nanking, or double the number 3 months ago. The number of Japanese shops has also greatly increased. The Japanese Consul General said that most of these Japanese civilians were small shopkeepers and it would seem, from observation, that they deal chiefly in Japanese imported goods. Until the end of September, when the Shanghai-Nanking railroad freight service was established, the Japanese goods sold in these shops were brought here by Japanese vessels; with the advent of the railroad freight service a fairly large amount began to be transported by this means, but the railroad cannot handle the increasing imports (and other freight) and a considerable amount is still brought here by Japanese merchant vessels.
In general, foreign goods can only be shipped and sold here through Japanese agents. The trade in petroleum products in the Nanking area, now only about 15% of normal, is handled chiefly through Japanese firms; one British and one American oil firm handle foreigners’ business almost entirely through Japanese agents; one American firm markets about 85% of its products through Japanese agents here, but is endeavoring to market the balance through its own organization, although all shipments from Shanghai to Nanking are [Page 92] handled through Japanese transportation firms. This company, however, fears that it is only a question of time until its Japanese agents will take over all marketing here. The trade in cigarettes and other foreign goods is almost entirely in the hands of Japanese firms, who handle shipments from Shanghai and marketing here; many American and other foreign goods, however, are being displaced by Japanese goods, this being particularly noticeable in the case of canned goods.
The Japanese attitude in regard to American and other foreign business in Japanese-occupied areas in China is well expressed in the following remark made some time ago by a Japanese businessman to an American fellow traveller on a train coming to Nanking: “Of course, you Americans are not allowed to do business in occupied territory but you can do it through a Japanese.” It becomes increasingly clear that the Japanese intend to control foreign trade in this area and to place every obstacle in the way of business by non-Japanese foreigners.
In view of the continued and serious Japanese interference with American rights and interests in this area, I cannot but be struck with the evidence in Nanking of substantial American contributions to the Japanese military organization, the actions of which have created the conditions against which we protest. The Japanese Army motorized equipment, in particular, appears to be largely American; the main streets of Nanking are full of Japanese Army motor cars, motor trucks, and tractors, and, from the observations of members of the staff of this office, at least 70 or 80% of these bear the names of American manufacturers. The American Douglas airplane in Japanese military service is a frequent sight over Nanking; yesterday, while driving past the inner city airfield, I noticed, among others, six planes, apparently Douglas transports. The representative of an American oil firm here informs me that a large part, if not most, of the gasoline used by the Japanese bombing and other planes based on Nanking is of American origin, and that a substantial part of the fuel used by Japanese naval vessels on the river is also of American origin. There are, of course, other American contributions to the Japanese military organization, which need not be listed here.
Sent to Shanghai, repeated to Department and Peiping.