393.1115/10–749: Telegram
The Consul at Shanghai (McConaughy) to the Secretary of State
[Received October 7—1:35 a. m.]
4208. Remytel 4201, October 5. By refusal exit permits on one pretext or another to key American business personnel in each important American firm Shanghai, evidently as high level policy decision, possibly determined Peiping, Communists have tacitly recognized their dependence on services rendered by these American firms and essentiality of personnel detained to retard deterioration Shanghai economy. ConGen believes authorities jarred by large numbers foreigners desirous leave Shanghai, especially bulk American salaried business personnel, practically all of whom filed exit permit applications. Obvious that labor unions sought hold American key personnel as hostages guaranteeing continuous employment but even more significant was deliberate rejection of Chinese management committees [Page 1353] clearly at highest Communist levels Shanghai, and possibly under top level orders Peiping. Obviously by agreeing to Chinese management committees, authorities could very easily have “moved in” in these American firms after departure American personnel and in actuality taken over management themselves through labor union pressure, intimidation Chinese managements. In other Communist countries policy toward “monopoly capitalist” property often involved expulsion alien managements personnel and confiscation assets.
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Although few of most essential key American business personnel left on Gordon, American companies were enabled reduce junior foreign staff substantially and their financial position temporarily eased. Not too much to say ship’s call improved position all foreigners remaining Shanghai, to which calls by Isbrandtsen ships also contributed. However, Kmt interference with these ships without firm US action tends confirm Communists in their belief we tolerate if not support Kmt “blockade”.
Round table of leading American businessmen with Counselor Jones prior his departure on Gordon disclosed general pessimism re prospects American business in Communist China, both short and long term, regardless whether Communist regime eventually recognized, with nonrecognition only giving deeper hue to outlook dark at best.