693.9431/5–1249: Telegram

The Ambassador in China (Stuart) to the Secretary of State

1012. We concur with Deptel 265, May 8 to Peiping, repeated Nanking 561, re tactics to be used in deriving greatest advantage from reported Communist desire to develop Sino-Japanese trade. However, we note that Peiping telegram 732, April 30 to Department, refers only to trade North China (regime referred to is presumably so-called North China People’s Government) and not to trade from other parts of Communist-occupied territory. If this interpretation correct, tactics envisaged will not benefit our being [ConGen] Mukden.

But we fear reported desire of North China for foreign trade will be short-lived and subordinated to national policy as soon as Communists establish central government. If we can confidently expect anything from Communists, it is that they will set up national foreign trade monopoly soon after formation national government. Importance of such monopoly is emphasized in Soviet writings and practice. In line with Communist custom in other countries, we must then expect Communist foreign trade monopoly to try to conduct all its discussions on diplomatic rather than consular level.

[Page 985]

Sent Department; repeated OffEmb Canton 404, Shanghai 564. Department pass Peiping, Tientsin, Tokyo, Taipei for Merchant unnumbered.