893.6359/8–948: Telegram

The Ambassador in China ( Stuart ) to the Secretary of State

1462. Reference Embtel 1365, July 26 and Embdes 321, July 2717 concerning renewal discussions with Wong Wen-hao on accord providing for Sino-US survey of Chinese deposits of uranium, thorium and allied minerals.

Meeting called by Wong at his home August 7 attended by himself, Embassy officer and two Chinese officials mentioned paragraph 2 reference telegram. In discussion, which lasted for about one hour, Wong raised following two points for consideration Department and AEC: (1) Chinese Government still desires to have included in accord understanding re laboratory equipment to be used primarily for testing minerals, et cetera, and not for atomic energy research in broad sense; (2) Chinese Government hopes US Government itself will purchase substantial amounts monazite from China.

Re (1), Wong said he would find it extremely difficult if not impossible to obtain Generalissimo’s approval of accord without something tangible being received for China; he added that he would also be subject to attack by Chinese physicists and other scientists who desire have beginning made in China of work in atomic energy field. Stated purpose of laboratory would be to test ores here quickly rather than to have them sent to US and also to conduct certain amount of experimental work of non-elaborate nature. Wong emphasized primary purpose of laboratory would be testing materials.

Wong expressed hope some American scientists could be stationed in laboratory and that exchange of Sino-American scientists interested in this field might be arranged. Regarding original suggestion that Chinese scientists might receive training in US, Wong said “we would be very glad if that could be done”.

Re (2), Wong said he hoped proposed accord would have “practical results” for China; that US Government purchase of monazite which analysis cited Department unnumbered air mail instruction [Page 748] dated June 8,18 indicated to be of relatively high quality, would provide Chinese Government with foreign exchange which could be used (a) to purchase all or major part of laboratory equipment and (b) provide fund in stable currency with which to meet Chinese Government’s obligations under proposed accord. Wong emphasized need for hedge against rampant inflation, pointing out that National Resources Commission was finding it extremely difficult to budget its regular expenditures in any reasonable manner, a problem which would be more acute with such extra-curricular activity as proposed survey.

According Dr. Hsieh, now available 500 to 600 tons monazite for immediate shipment, this amount capable being increased to 1,000 tons and with total reserves estimated 60,000 tons. By means magnetic separator which now in Kwangsi at or near deposits, possible concentrate monazite up to 90 percent purity. Wong said that price of US $100 per ton delivered New York, mentioned Department’s instruction of June 8, appeared to be much too low especially in view recent action taken by Governments of Brazil and India to prohibit further exportation of monazite which action assertedly has caused world price to rise to between US $150 and $160 per ton. Hsieh expressed hope US Government might be willing pay US $200 per ton preferably f. o. b. Chinese port. Even at that figure, NRC chairman Sun pointed out, business would be losing proposition.

Embassy inclined recommend careful consideration be given to Wong’s two points as means conclude negotiations on this matter. Questions that need to be answered obviously included: (1) Possible US policy factors re export of equipment and cost for equipment of laboratory of type envisaged by Wong; (2) possible desirability US Government purchasing certain amounts of Chinese monazite to permit Chinese Government to buy laboratory equipment and to provide hedge in US currency for meeting expenses involved in proposed survey. Apparent, of course, that should US Government buy monazite at price considerably higher than price ruling New York market, that would constitute subsidy payment of which may eventually be considered justified on basis potential value results obtainable from survey. We consider price of US $200 per ton subject to negotiations.

We would appreciate receiving Department’s instructions as to response to be made to Wong.

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