693.0031/5–1149: Telegram

The Consul General at Peiping (Clubb) to the Secretary of State

815. ReDeptel 265, May 8. Observed Department’s proposed line action for SCAP apparently based on premise direct approach will be made him by agents interested in trade. Unclear whether this means agents Japanese firms or representatives Chinese Communists in Japan indicated Shanghai’s 1556, May 9, to Department. Believe Communists should not be permitted by-pass Consulates on this occasion, especially since they have already by implication accepted this office as transmitting agent. Granting that American response might be less brusque, believe it should still be designed either keep negotiations in channel Consulate-Department-SCAP or achieve regularizations status North China Consulates. Believe that extreme Communist reaction improbable because their dire economic need, that improbability could be increased by tactics omitting direct response first suggested but channelizing all negotiations in fact through Consulates, that this opportunity force Communists into normal channels instead of those dictated by arrogant “anti-imperialists” should be fully exploited. Suggest SCAP response to any approach should be more direct reference to Consulates in China, that is, that Consulates should be shown as integral part initial negotiations instead of organs which might merely facilitate. Suggest therefore second, third sentences should read along general lines.

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“In order assist SCAP in determining availability desired Japanese exports, interested Communist officials should present proposals and full information to American consular representatives located in areas intended importation and utilization. Expeditious provision in that manner of information desired by SCAP could be expected facilitate completion transactions and movement trade. Consulates of course would not handle actual trade operations, which would be subject arrangements to be worked out in due course by SCAP directly with firms concerned.”

For reference, note unconfirmed report Communists are negotiating with Hong Kong [and] Shanghai Bank, Tientsin, for loan 3 million US dollars for purchase wheat. Similar report another source is that Communists desire purchase flour. British Consul states Communist representative approached British Consul [at] Tientsin with request arrange for direct radio traffic between Tientsin station and Hong Kong (because added difficulties experienced as result break international communications previously relayed Shanghai). Note here present importance this Consulate radio for contact equipment with outside world.

Report purportedly Communist in origin indicates Communists plan some regularization position regarding foreigners and Consulates after occupation Shanghai.

Today communicated to intermediary Chang sense fourth paragraph Depreftel for what benefit message might incidentally bring to development contacts with Communist side.

Pass Nanking 517. OffEmb Canton 108, Shanghai 540, Tientsin 46. Sent Department 815 from Peiping.