The Consul at Tihwa (Paxton) to the Secretary of State
[Received March 3—10:58 p. m.]
48. Rumored General Chang has blanket authority approve trade pact without further reference Central Government. If agreement found embarrassing, Central Government might consider special status northwest provinces. From here this seems possible direction events.
Local gossip that trade to be with Chinese Government monopoly not individual merchants rendered plausible by probable reluctance local officials sacrifice rich revenues obtainable through handlings reference Cantel to Department 85, February 27.
March 1 Aisabek22 in strict confidence claimed draft treaty not yet agreed on includes freedom Soviet trucks from any examination as well as permissive trade with Sinkiang merchants despite loss official revenue and chance for graft.
Proposed duration trade pact 20 or 50 years but he felt even shorter time would permit Soviet absorption area before expiry.
Autonomy party now includes: Turkis-Mesud, Mohammed Imin, Aisabek and Yolbars of Hami; Kazaks-Osman, Kalibek, Tatawan and Jaminkhan (last named has reconciled differences with other Kazaks but he and Tatawan considered weaker than rest); and small group younger Turkis of less experience but much promise. They expect General Ma Chen-hsiang’s entire fifth division cavalry army to remain Sinkiang and give them support based on backing of his uncles, chairmen Tsinghai and Ninghsia. Reduction man (Ma’s?] troops probable but not their complete evacuation (conference all Sinkiang brigade commanders now in session Tihwa and hope for data shortly). If necessary Ma Chen-hsiang plans set up fastness near Qotien23 for all anti-Soviet elements Sinkiang.
Aisabek implores American aid block trade accord which would hand over Sinkiang as chattel to USSR against bitter opposition natives. He believes pact will have fro forma approval of Central Government as General Chang, though apparently empowered act independently, intends submit it.[Page 1050]
On Sheng’s expulsion of Russian advisors, China bought equipment, Wusu oil wells from Soviet Union (apparently still producing in April 1947 when we passed and not yet reported capped. Sinkiang constant market for petroleum products as nearest refinery under Chinese control Sewe [some?] 700 miles east Tihwa at Yumen in Kansu).
Present plans are for commercial transactions between Soviet organization and larger Chinese firms as well as provincial trading organization. Liu rejected as absurd suggestion that customs inspections on trucks entering Sinkiang might be waived, stating with heat that area was still Chinese and as Central Government official he would not be party thus signing away national rights. As for diversion customs revenue to provincial use, he implied possibility by asserting domestic matters included Sino-Soviet discussions.
He said question mineral expoitation or reconstruction cooperative companies, either separate or joint Sino-Soviet, not yet considered and would not arise until trade agreement settled which could not be very soon as draft must be referred to Central Government for approval which would probably take some weeks at least. He has also, however, previously averred go [no?], discussions re Sino-Soviet air line re negotiations would occur for sometime but Sinkiang news agency March 1 reports Soviet delegation of six under Avseevich, Vice Chief Civil Air Affairs, arrived here February 28, to draft new air line pact.
Liu regretted inability reveal more details current talks but stated he had received two warnings from Foreign Office to hold them in strict confidence (perhaps particularly from US). However, even his guarded comments appear illuminating.
Sent Department; repeated Nanking 49, OffEmb Canton 11.