600.939/6–1849: Telegram

The Consul General at Shanghai (Cabot) to the Secretary of State

2338. ReDeptel 1174, June 11, 7 p. m.82 ConGen wishes emphasize need for considerable flexibility in administrative export controls adopted with British cooperation to take account very evident trend toward economic political regionalism in Communist China which may eventually lead to formation “Union [of] Socialist Republics” in China, with Manchuria as first unit. Broad differences treatment [Page 946] foreign consular personnel, foreign exchange problems, foreign trade banking regulations, currency and domestic exchange rates, taxation and travel regulations, etc., evident between North and East Central China, though less marked than north Great Wall. Yee Tsoong also reports regional administration appearing former Meng Chiang84 area. Likelihood South China and portions West China will also take shape under separate quasi-independent administration, with distinctions in terms trade controls, taxation, etc.

Although evident general trade control policy must be applicable all China, ConGen believes possible advisability administering licensing exports to specific areas on selective basis by areas determined by treatment accorded American interests worthy careful study, partly for direct effects justifiable by differing conditions in various areas, and partly in effort lead East Central and North China to closer orientation toward Atlantic power and away from orbit Soviet and Soviet-dominated Manchuria. Such administrative procedures might even prove useful weaken Soviet influence Manchuria.

At same time ConGen reiterates its view premature curb exports in absence serious overt act obviously prejudicial our national interests since might give color our initiation campaign economic warfare which might hamper efforts undertaken North China, Nanking and Shanghai toward establishment consular offices and whole American commercial, cultural position on proper basis.

Sent Department; repeated Canton 739, Nanking 1237; Department pass Peiping 176, Tientsin 74.

  1. See footnote 38, p. 853.
  2. Inner Mongolia.