811.20 (D) Regulations/3950
The Consul General at Shanghai (Lockhart) to the Secretary of State
[Received August 4.]
Sir:
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Summary: Many requests are being received by this Consulate General for assistance in securing export licenses. As there is a temptation [Page 823] to ask for greater quantities of goods than actually required, to hoard goods rather than put them into production, or to sell at high prevailing prices rather than to process into finished goods, it is difficult to determine the legitimacy of requests. Shanghai has served as a supply base for Germany, Japan, Soviet Russia and for yen-bloc areas such as Manchuria. German demand will now be absent in view of the Russo-German hostilities, which have cut off the forwarding route via Siberia. Japan will remain a taker from the Shanghai market. It is virtually impossible to control the ultimate destination of goods once they get into the open market. The maintenance of a status quo at Shanghai in goods and in exchange is undeniably of aid to Japan but preserves the American, British and loyal Chinese vested position built up over many decades, and possibly staves off more aggressiveness on Japan’s part with regard to the concentration of wealth in the Settlement. Certain British firms seeking American materials have functioned in a highly opportunistic way in adjusting themselves to the Japanese occupation of this region. Export licensing is closely related to the subject of currency stabilization, with America the chief source of Shanghai’s exchange resources whether derived from an exchange stabilization fund or from the open market. This Consulate General is refraining from recommending export licenses in cases where there appears a likelihood of the goods passing into Japanese or other undesired hands or where hoarding or war profiteering motives appear to be behind the requests.
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Respectfully yours,