893.24/9–2046: Telegram

The Consul General at Shanghai (Davis) to the Secretary of State

1783. 1. Consulate General’s representative has discussed with General P. Kiang, Director of Board of Supplies, Executive Yuan,6 present ban on import of surpluses (Remytel 1756, September 17, repeated Nanking as 998). Kiang states ban was imposed specifically at [Page 1081]request of BOSEY in order to protect latter’s projected program of surplus property sales and also to conserve Chinese foreign exchange.

2. BOSEY does not intend hereafter to permit import and sale of surpluses other than its own which were contracted for subsequent to June 23 when according to Kiang tentative agreement7 was reached with General Marshall8 to effect that Chinese Govt would buy Western Pacific surplus stocks in bulk subject to terms of contract to be negotiated. Chinese private interests subsequently negotiated in Philippines and elsewhere for surplus, the import and sale of which BOSEY maintains would jeopardize program being planned by it, and for which Govt is unwilling to permit dollar expenditures. Proposed procedure under ban is that BOSEY would take over any such imports unless they are needed items which are not available from BOSEY stocks, or unless BOSEY considers that their distribution will not conflict with Govt’s sales program. Ban does not affect any surplus purchases prior to June 23 last, but will presumably make it impossible for U. S. agencies in China to dispose of surplus items, which they brought in duty free in local market without the specific consent of BOSEY.

3. In discussing possible effect on American business community of ban, Kiang stated that American importers were to be subject to same restrictions as Chinese importers and would not be permitted to bring in surplus for resale if similar commodities were available from BOSEY. Kiang stated that surplus items bought elsewhere for direct use here by American firms, such as oil tankers, would not be affected by ban whereas empty oil drums procured from surplus elsewhere would be refused import clearance because they are available from surplus stocks here and would be resold. American firms will therefore be warned to check availabilities from BOSEY before contracting for surplus elsewhere if such supplies are for indirect use or resale in China.

4. Discussion with Kiang disclosed that operation of ban had not been thought through very thoroughly by BOSEY. He has agreed to issue public announcement clarifying meaning of it. Department will be informed if actual restrictions imposed on imports appear to warrant protest by United States as being detrimental to American commercial interests or not in accord with overall surplus sales contract. Kiang asserts immediate purpose is to check speculative buying by private Chinese interests.

Repeated Nanking as 1006.

  1. Generally referred to as BOSEY.
  2. See memorandum by William E. Vogelback, June 22, p. 1041. Mr. Vogelback was then the appointed Central Field Commissioner, Pacific and China, Office of the Foreign Liquidation Commissioner (OFLC).
  3. General of the Army George C. Marshall, Special Representative of President Truman in China.