693.0031/6–1849: Telegram

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

2346. Department reminded periodic post-war reports Tientsin regarding trading North West China [and] Manchurian exports to USSR for dumping on world markets to acquire foreign exchange Soviet benefits. Rumored here Liddell Bros., British firm, recently sold 60,000 Hankow goatskins to USSR Trading Company similar purpose. Also reported Soviets active acquiring by barter and purchase substantial quantities Tsining Shantung furs, some North China bristles as well as practically all Manchurian bristles, furs and from Turkestan-West China camel wool cashmere, most of which destined [Page 947] London, New York as in past years. Kmt Central Trust barter deal early 1947 recalled enabling Soviet dump substantial quantities bristles in London.

Consul General believes considerable truth Tientsin’s 407, June 13 [9], 4 [3] p. m.,85 regarding Communist intention create Amtorg counterpart which we feel would facilitate USSR in acquiring dominant role marketing Chinese exports [from] North China [and] Manchuria in world markets primarily as device acquisition foreign exchange for Soviet benefit but also run legitimate foreign and Chinese traders out of export trade, reminiscent pre-war Japanese trade tactics. Consul General believes Tientsin, Peiping may be able furnish useful information regarding current trends North China [and] Manchurian trade [in] furs, bristles, et cetera, indicating Soviet buying or barter along lines suggested.

Consul General regards this problem serious and more difficult solution than devising enforcing essential export controls Communist China with British [and] other Atlantic powers cooperation. In view plan send technical delegation London discuss export controls (Deptel 1174, June 11, 7 p. m.86) Consul General recommends delegation review with British ways, means combatting Soviet efforts monopolize Manchurian and China exports for dumping London and New York to disadvantage all legitimate foreign trade in China proper.

With regard Tientsin bristle monopoly, Consul General Shanghai expects, once remittance, shipping and rail facilities effectively reestablished, large scale revival smuggling North China bristles here, notwithstanding control efforts North China Foreign Trade Bureau, particularly so long as wide spread exists in US dollar rates now PB 1650 Shanghai against about PB 1,000 to 1,200 North China. In past, Shanghai shippers also benefitted lower customs valuations used calculate amount foreign exchange delivery required Central Bank. Despite new economic concepts, Consul General expects traders use tried methods evade trade foreign exchange control procedures whenever inconvenient, in which they most expert.

Consul General feels deal described Tientsin’s 405, June 14 [9], 5 a. m. [2 p. m.]85 and similar messages Tientsin clearly establish need effective US policy coordinated with British to deal with Chinese exports from Communist areas.

In dealing with specific problems North China, Manchuria bristle trade, Consul General suggests consultation with Kronk, Vice President Frederic Cone and Company, New York City, recent visitor at Shanghai.

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Repeated Canton 741, Nanking 1243, Hong Kong 157, Peiping 177, Department pass Tientsin 76.

  1. Not printed.
  2. See footnote 38, p. 853.
  3. Not printed.