800.20293/12–145: Telegram
The Consul General at Shanghai (Josselyn) to the Secretary of State
[Received December 2—5:19 p.m.]
303. Consulate General concurs in Department’s views regarding inadvisability of participating in Sino-American organization proposed by Soong to Bayne. (Reference Department’s 212, November 26, 8 p.m.) The memoranda of conversations which Bayne gave me have been forwarded to Embassy.
It would seem desirable, however, that the United States should be able to have precise and accurate knowledge regarding continued enemy economic penetration. Reference Chungking’s secret despatch No. 828, October 30, also Chungking’s despatch No. 801, October 17,93 on United States Intelligence Service in China; also paragraph 3 Chungking’s telegram 1812, October 17, and Shanghai’s despatch No. 19, November 24,93 regarding 50 versus 60 cycle in Chinese electrical power development. A more definite instance of German success at ingratiation and activities likely to influence Chinese by a manner inimical to American interests is a report now under investigation through American intelligence agencies that top local Germans in the DEFAG,94 representing German Dye Trust, are to sit on a committee with Chinese officials to control the disposal by the Chinese Govt of that portion of local German Dye and chemical stocks not already hidden in hands of Chinese and possibly Swiss. These stocks are estimated by Allied trade sufficient for the next 2 years estimated present consumptive capacity of China market. Local interested Americans, their Chinese distributors, also British and French dye interests believe it should be an Allied and Chinese business group, not German advisors, who should sit on this committee.
Some local Germans patently do not deserve punishment, but it seems clear that in general, even those interned are going to have very soft treatment from the Chinese authorities. Some 104 Nazi Party [Page 691] members and their families have been interned by the Chinese in Shanghai but the control is very loose. Many internees can freely leave camp on passes. Others have their secretaries or other employees visit them in camp bringing papers and documents and carrying out instructions given.
The above is indicative of the need for keeping ourselves fully informed of what the Germans and Japs may seek to do economically possibly with the connivance of certain Chinese business interests. A joint Sino-American economic intelligence organization might merely serve to “muddy the water,” and prevent our knowing what is actually going on.
Sent to Department, repeated to Chungking.