The Consul General at Shanghai (Cabot) to the Secretary of State
[Received July 8—5:06 a.m.]
1528. For Ramsey17 and Murphy. Luboshez sends. Officially informed by Kiang that he considers June 30 cut-off date for declarations. He enclosed copy his memorandum to Foreign Office stating his interpretation of contract and belief that property on future declaration would be worthless. He also asked Foreign Office to [Page 712]arrange for discussions on disparity. Kiang ordered his field representatives to refuse to accept notices of availability and Guam reports Bosey returned notices served July 3 totalling 2 million procurement costs. Ambassador and I had conversations at Shanghai July 7 at which it was decided:
- In order to permit speed-up of removal operations to press for firm highest level Chinese policy decision as to priorities for disposition of property acquired under contract as between (a) sales for foreign exchange and (b) shipments to China. Such decision must take into account that Chinese attempts to sell property for foreign exchange have not been successful and have seriously delayed removal operations for over 6 months past.
- To ascertain whether Bosey’s refusal to accept property after June 30 was dictated by (a) genuine fear that future property would be worthless or (b) desire for maximum under-run in order to obtain dollar exchange in settlement.
If 2 (b) governs, it was decided that China should be informed that in no event would a cash settlement be made so that they should consider advisability of taking all property to be made available up to a date to be mutually agreed upon. Matter was thought of sufficient importance to warrant Ambassador taking questions personally to President18 or Prime Minister19 at once and he will urge speedy reply in view of my prospective departure Washington. Will discuss with Minister Clark20 [the] Foreign Office reply which arrived subsequent to conversation with Ambassador.
Sent Department 1528, repeated Nanking 1239. Department please pass OFLC Washington as OFLC Shanghai’s 2966. [Luboshez.]