893.6363/209: Telegram
The Second Secretary of Embassy in China (Clubb) to the Secretary of State
[Received 11:45 a.m.]
28. Foreign rights and interests. A report emanating from an informed Japanese source indicates that there is under discussion among concerned Japanese organizations a proposal for the establishment of a “sales control” system for the marketing of petroleum products, [Page 394] to begin functioning early in May. The project reputedly would lead to the effecting of a semimonopolistic control of distribution from Shanghai. The concerns participating in the discussions are reported by Socony to be Taiheiyoko, Fucumhow (acts as agent for Asiatic Petroleum Company), Idemitsu, connected with Nippon Oil Company, acts as agent for Standard Vacuum Oil Company in Shanghai; (big importer of petroleum products into China), Mitsui Bussan Kaisha, and Tehsheng Hao (Sino-Japanese).
The project is said to have its origin in the feeling of certain Japanese interests that occidental concerns have recently been obtaining far too large a share of trade in this part of China. A major portion of the chief articles of commerce, comprising petroleum products, cigarettes, matches, cotton goods and soap, is supplied by non-Japanese foreign firms. (Japanese business houses have been making some inroads into the match field, but are said to be at present unable to take full advantage of existing opportunities in the market for cottons; in the other fields American and British products dominate.) A Japanese consular officer is said to have recently made a study of market conditions existing in the various Yangtze ports and to have reported that about 80 percent of the foreign goods sold comprise non-Japanese products. It is reported that the Japanese diplomatic representatives in China are opposed to the imposition of further restrictions on occidental interests but that certain Japanese commercial interests, suffering from competition both among themselves and with British and American interests, with the support of the army is demanding a setup which will give them a more substantial trade advantage. The project seems to have derived its inspiration locally rather than in Japan. If given effect it would presumably bring the occidental oil companies ultimately face to face with the same fate they met in Manchukuo.40
It will be noted that the project even as reported is still in an amorphous stage. Any further pertinent information which may be obtained will be promptly reported.
Repeated to Peiping, Shanghai, to Tokyo by mail.