893.5041/54: Telegram
The Counselor of Embassy in China (Lockhart) to the Secretary of State
[Received 10:15 p.m.]
484. Standard Vacuum Oil Company here states that it has received reports from a number of its agents in Shansi, the Kalgan (Mengchiang) area, southwestern Hopei, and northern Honan, to the effect that the local authorities, Chambers of Commerce or special “control committees” acting presumably under orders, have recently issued instructions fixing wage scales and prices for various commodities, including kerosene and candles. The company reports that the prices fixed for kerosene and candles are in all cases several local dollars below the prices at which it has authorized its agents to sell and the company states that its selling prices are regulated to cover cost in United States dollars, plus import duties, freight, handling charges, et cetera, and that it is unable to sell at the prices which have been fixed by the local authorities. In one place, Sinsiang, Honan, the company’s agent has been ordered by the local authorities concerned to sell at the fixed price and the company believes, from reports of its agents, that similar instructions may shortly be issued at other places.
The company states that it seems clear, from the fact that more or less similar instructions have been issued over a wide area, that the orders emanate from some leading authority, presumably the Japanese authorities in North China or the Japanese controlled “Provisional Government”. The company requests that the matter be taken up by the Embassy with the appropriate authorities.
The droughts and floods in North China together with currency and trade under the present conditions have resulted in sharply increased prices for commodities and the Japanese and their Chinese agents are apparently attempting to meet the problem by fixing prices; with the exception of Peiping and Tientsin the fixed price lists generally include kerosene and candles. The Embassy knows of no grounds for protest against the fixing of commodity prices by the local authorities provided no discrimination is involved, but it considers that representations are warranted and should be made against any attempt to compel American firms to sell at such fixed rates. The Standard Vacuum Oil Company states that practically all the kerosene and candles in this area are supplied by three firms (two American and one British) and that if the authorities concerned are unable to force these firms to sell at the fixed prices, there will have to be a revision upwards of such prices to meet the point at which the companies can sell and retain a reasonable profit. It is understood [Page 459] that the only other firm in this business (a Japanese concern) can handle only a small fraction of the business and cannot meet the demand in this territory.
The Embassy proposes subject to the Department’s approval to take the matter up with the Japanese Embassy with a view to obtaining the cancellation of any orders to force American firms to sell at prices unacceptable and unprofitable to them, but will appreciate the comment of the Department on the matter.
Copy by mail to Chungking, Tientsin and Tokyo.