893.102S/2432: Telegram

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

67. Your 108, March 22, 10 a.m., Shanghai’s 341, March 25, 5 p.m.,88 and related telegrams in regard to the International Settlement at Shanghai.

It is the Department’s understanding that the principal cause of dissatisfaction with regard to the existing administration of the International Settlement revolves around the question of taxation. While the Department continues to adhere in general to the views expressed in the Department’s aide-mémoire delivered to the Japanese Foreign [Page 840] Office by Mr. Grew on May 17, 1939,89 the Department believes that, in view of the commonly felt need for a revision of the regulations governing the imposition of taxes, action directed toward that end might be feasible and advisable.
The Department accordingly suggests that, unless you perceive objection, you request that the American Consul General at Shanghai take up with his interested colleagues the question of asking the Municipal Council (upon which the American, British, Chinese, and Japanese communities all are represented) to draft an amendment to the land regulations which the Council feels would meet the needs of the present situation with respect to taxation, confining the draft to this one specific point. Such draft could then be submitted to the interested consuls for consideration and possible approval and thence to the concerned Governments, including the Chinese Government.
The Department does not understand that reference of the question of the amendment of the land regulations to the ratepayers or to the Shanghai Municipal Council is required but suggests that reference of the question to the Council would be preferable to the drafting of an amendment by the interested consuls because the Council is representative of the main Shanghai communities concerned. By such reference the large Chinese community at Shanghai would be represented in the task of drafting the proposed amendment.
The Department realizes that the above suggestion does not accomplish anything toward adjustment of the controversy in regard to voting qualifications or reapportionment of membership in the Council. These questions would not seem to be so pressing as the question relating to taxation, and the Department wonders whether satisfactory adjustment of the question relating to taxation might not make it feasible to postpone consideration of the other questions. The Department, however, has no objection to discussion of these other questions continuing to the end that a reasonable and satisfactory solution may be found.
The Department raises for your consideration and that of the Consul General at Shanghai the question whether it would be practicable and advisable for the ratepayers’ meeting to be postponed for a few weeks. The Department would not desire that you and the Consul General at Shanghai act affirmatively upon this suggestion unless you and the Consul General should feel that the advantages of such a course would be likely to outweigh the disadvantages.
The Department suggests that, before taking any action toward carrying this instruction into effect, you have a further discussion with the Chinese Minister for Foreign Affairs and ascertain his reaction to the general thought set forth in this telegram. The [Page 841] Department also suggests that perhaps before discussing the matter with the Minister for Foreign Affairs you may wish to have the comment of the American Consul General at Shanghai.

Sent to Chungking. Repeated to Peiping and Shanghai. Shanghai repeat to Tokyo.