Foreign Relations of the United States, 1949, The Far East: China, Volume IX

693.119/9–949

Memorandum of Conversation, by Mr. Robert N. Magill of the Division of Chinese Affairs

[Washington,] September 9, 1949.

Participants:	Mr. Dening, British Foreign Office, Assistant Under-Secretary for Foreign Affairs in Charge of Far Eastern Matters
	Mr. Meade, Counselor, British Embassy
	Mr. Ford, First Secretary, British Embassy
	Mr. Butterworth, FE; Mr. Merchant, FE;
	Mr. Freeman, CA; Mr. Magill, CA; Mr. Wright, CP.

In the course of a conversation on China with Mr. Dening and members of the British Embassy, the subject of trade with Communist China was introduced. With reference to the U.S. proposals for joint U.S.–U.K. control over strategic exports to China, Mr. Dening stated that the U.K. Ministers had reconsidered their position in accordance with the request contained in the U.S. Embassy’s Aide-Mémoire of August 3; that they had reached a decision along the lines of their previous position; that a reply was being formulated which they had hoped could be presented by Mr. Bevin to the Secretary during the course of the present conversations. Mr. Dening read through hurriedly what appeared to be the text of this reply, the burden of which was that, while there was no difference between U.S. and British aims with respect to China, the U.K. doubted that a joint demonstration of ability to control strategic exports to China would have the desired effect. Mr. Dening indicated that they did not understand the nature of the threat which the United States apparently wished to guard against by the imposition of controls over strategic industrial materials. In commenting on the British position, he emphasized that the U.K. had already taken steps, in conjunction with the Hong Kong and Singapore Governments, to prohibit the movement of military supplies and equipment to China.

Mr. Butterworth reviewed the considerations that govern our approach to the British on the subject of export controls with respect to China. He stated that we consider controls on exports to China essential: (1) to close the back door (China) on the movement of goods to eastern Europe that are otherwise denied to that area, (2) to guard against acquisition by the Chinese Communists of goods of direct military utility, and (3) to disabuse the Chinese Communists of their preconception that western nations are necessarily, by virtue of their capitalist and imperialist societies, bound to accept a passive role in their economic relations with Communist China. Mr. Butterworth pointed out that to achieve the third objective we should, together with the British and other important western governments, control selected goods of importance to the Chinese economy, not with the idea necessarily of arbitrarily preventing the flow of such goods, but as a symbol of our ability to take punitive measures against the Chinese Communists if such action should be made necessary in the future. He added, however, that punitive action was not in the forefront of our thinking.

Mr. Butterworth indicated assent to Mr. Dening’s assumption that we were in agreement with the British position with respect to the importance of obtaining multilateral cooperation in the control of 1A exports to China. He added, however that he was not sure, judging by the language of the U.K. note of August 1, that the British understood our desire that they join us in any approach to the continental governments on this matter; that we thought this had been made clear in the course of our discussions with the British Embassy since last February. Mr. Dening and his colleagues responded that they were not aware that the Department had made explicit its desire for a joint or parallel approach, and reference was made to our August 3 memorandum in which no mention was made of such an approach. Mr. Butterworth commented that the memorandum did not deal with the matter of a joint approach to the continental governments at that time since we were hopeful that the British would shortly also agree in principle to the control of 1B exports which could then be included in the scope of a joint approach. In response to Mr. Butterworth’s query as to why the British had selected petroleum as the only export of importance to the Chinese Communists that they were willing to control, Mr. Dening stated that the U.K. regards petroleum of particular importance since it could contribute significantly to the military capabilities of the Chinese Communists or the Nationalists. He indicated that the British, for example, do not relish the idea of western petroleum supplies making it possible for the Nationalist Air Force to damage British shipping and other property in the Shanghai area. Mr. Dening added, however, that he envisaged the possibility of permitting aviation gasoline to move to China in quantities sufficient to meet normal needs for international air services if they are reestablished.

Mr. Merchant took occasion of the mention of aviation to review the U.S. position in this regard. He stated that U.S. Government was interested in the resumption of regular international air service to China when conditions made it possible for operations to be carried on safely. He pointed out that we had initially been opposed to establishment of a shuttle service between Shanghai and Hong Kong on the ground that, since this would provide the Communists with an outlet to existing international aviation routes, it might prejudice the reestablishment of regular international service in China; that subsequently, however, we had been willing to see U.S. airlines participate in a temporary shuttle for evacuation purposes if assurances of safe conduct could be obtained. He observed that it appeared that Jardine⁶⁴ intended to operate a night shuttle without assurances of safe conduct; that this intention appeared to bear some relation to the difference in U.S. and U.K. views on the question of arranging for shipping to go into Shanghai; that we were interested in facilitating shipping solely for evacuation purposes, whereas the British were interested in using shipping to carry in supplies that might enable foreign business personnel to remain in Shanghai. He expressed the belief that we were not likely to be able to arrange an air shuttle service that would be acceptable to both the Nationalists and the Chinese Communists.

In response to Mr. Merchant’s inquiry, Mr. Dening stated that he believed that Jardine intended to go ahead with the shuttle service without the Chinese Government’s assurances, although the Hong Kong Government might not permit night landings or take-offs at Hong Kong. He observed that the only significant consequence of a shuttle service would be to boost the morale of the foreign community in Shanghai. In response to Mr. Merchant’s inquiry, Mr. Dening assured him that the U.K. was still in agreement with the U.S. on the undesirability of participation by western airlines in the creation of an internal Chinese aviation service.

Mr. Dening went on to discuss the relative merits of evacuation of British economic interests in China versus an attempt to maintain a foot in the door. He stated that the British Government entertained no doubts at all that the Chinese Communists were 100 percent Marxists and that they fully intended to apply Communist doctrine in China. He observed, however, that they might have considerable difficulty in doing so as a result of China’s chronic economic handicaps and the basic individualism and commercial opportunism of the Chinese people. He continued that, if and when these difficulties begin to have effect, the Chinese might then realize their need for beneficial economic relations with the West and that British and other western interests should be on hand in China at that time to take advantage of such favorable factors as may emerge. Mr. Dening emphasized that the British believed that, so long as there exists a faint hope for such developments, British interests should remain; that if they should now withdraw there would be no possibility of their reestablishment within our life-time. He added that there had recently been some signs that the difficult labor situation in Shanghai was beginning to ease.

Mr. Butterworth commented that the term “evacuation” had been used rather loosely, and took occasion to review the Deparment’s attitude towards the position of American business men in Shanghai. He then asked Mr. Dening if the U.K. had given any thought to convoying British shipping into Shanghai. Mr. Dening responded that consideration had been given to the question but that no decision had been made; that the British hoped rather that the Chinese Government blockade would let up. He added that the French are also planning to send a ship into Shanghai to permit evacuation, but that they share the British view regarding the desirability of keeping a foot in the door.

Mr. Merchant returned to the question of export controls and stated that no U.S. action had been taken to apply new controls to China, that such action could only be taken after elaborate inter-Departmental consideration, but that we hoped to have a decision to communicate to the British before Mr. Bevin leaves.

64. Jardine, Matheson & Co., British shipping firm