393.1115/9–1449: Telegram
The Consul at Shanghai (McConaughy) to the Secretary of State
[Received September 14—6:57 a. m.]
3839. Following refusal exit permits key Caltex personnel, Chinese Management Committee sent letter to Alien Affairs Department SMCC61 asking reasons, citing infringement personal liberties, incomprehensible as American staff had relinquished management responsibilities to Chinese Committee set up with approval authorities under power attorney executed at American Consulate General and recognized by National City Bank, several important private Chinese commercial banks.
Alien Affairs Department orally explained Communist authorities as such had no intention withholding exit permits to foreigners so long as all outstanding business including labor questions settled and that labor objected in Caltex case.
Thereupon member Caltex Chinese Committee arranged 90-minute meeting with Secretary [of] Mayor Chen Yi, concurrently Secretary General CCP Shanghai, at which Caltex manager present. Session conducted entirely in Chinese and in presence Secretary’s interpreter though former understood English.
Secretary reiterated statement Alien Affairs Department that Communist authorities have no intention withholding exit permits from any foreigner wishing to leave provided all unfinished business settled, that Caltex differences arise from demands labor, that deputy mayor now in Peiping “on the carpet” for unsatisfactory handling labor problems in Thai [Shanghai?], problem giving Shanghai authorities great concern.
Secretary was shown Chinese Committee’s power attorney, New York cable outlining Caltex policy re remittances cover wage settlement in case stocks inadequate due belligerent action and copy letter to company labor union re severance pay, dismissal policy, offering terms far more liberal than maximum required by SMCC regulations August 19, on which company labor union obviously deliberately stalling in effort prevent departure American personnel. Copies these documents given Secretary at his request to show mayor in effort obtain mayor’s approval for letter giving authorities’ official recognition to Caltex Chinese Committee, apparently in effort to have showdown with labor.
[Page 1338]Caltex impression Communist authorities view organize Chinese management committees with favor as getting foreigners out of China, simultaneously retaining trade benefits through management vested in Chinese hands but that labor prefers hold American key personnel as hostages, distrusts Chinese management committees especially their ability keep companies supplied with stocks remittances et cetera to meet whatever extortionate demands labor can dream up. Caltex feels its labor union doing everything possible prevent departure key Americans and successful operation Chinese general management committee.
Caltex interview with Secretary indicated Shanghai authorities fully aware undesirability present situation whereby city is subject to “government by labor” which will inevitably lead to chaos, but find themselves in dilemma as firm assertion authority overlapped by Communists might alienate support this most polity significant group, among few now supporting Communists. Ultimate showdown must come but probabilities are Communists will approach problem slowly, cautiously seeking to avoid necessity for use or even show force against labor.
However, following publication notices given [garble] September 14, Caltex and Stanvac personnel called at police station to obtain exit permits and were told that notwithstanding newspaper notice permits denied on application company’s labor unions. In case Caltex refusal based on union’s telephone call to police.
Caltex holding meeting September 15 with labor union seeking agreement following three points: (1) Exit permits for foreign staff; (2) Acceptance Chinese management committee; (3) Terms severance pay. Should these negotiations fail, company proposes call on SGLU62 for mediation.
These developments confirm earlier opinions American Chamber Commerce and Consulate General that key management technical personnel would be held as hostages by labor for ransom through delaying tactics in reaching agreement in severance pay, other matters.