661.9331/3–249: Telegram

The Minister-Counselor of Embassy in China (Clark) to the Secretary of State

Cantel 91. Chen Tai-chu, director American section FonOff, sent for me re Sino-Soviet trade talks. He confirmed what Dr. Sun Fo had told me re barter and mineral exploitation, my [Cantel] 81, February 25, repeated Nanking 78, Tihwa 1, Moscow 1, but said Dr. Sun was mistaken regarding separate Soviet and Chinese corporations.

He began by stressing that negotiations were being carried on by China in respect of regionIli, Tacheng and Anshan, where Soviets were already largely in control and where Chinese could not afford to be too firm without prejudicing their sovereignty. Although he would [Page 1051]not elaborate, he thought implications Soviet approach trade negotiations those areas this time most interesting. He confirmed that Chinese took initiative in earlier negotiations but insists initiative these negotiations, which began February this year, had been Soviet. Chinese were reluctant agree that under barter arrangements Soviet monopolies would deal with individual traders on China side and were planning creation special corporation or corporations to deal with Soviet monopolies. This may have been, he said, what Dr. Sun had in mind when he spoke of separate corporation. Also, Soviets desire that barter encompass everything and Chinese desire name specific commodities. Exploitation of mineral resources in area had, under old arrangements, been under joint Sino-Soviet companies and, in fact, he understood exploitation in some form is taking place now. Chinese would hope that Sino-Soviet corporation would be on 50–50 basis and that it will be possible Chinese participation would be more effective than hitherto. Here also Chinese hoped to specify minerals to be exploited rather than agree to broad terminology suggested by Soviets. Once again he reminded me, however, that China is not in strong position to argue.

In answer to his inquiry, I told him our main interest was to assure our rights under our 1948 [1946] treaty.

Sent Dept repeated Nanking 85, Tihwa 3 and Moscow 3.