893.00/7–1448: Airgram
The Consul General at Shanghai (Cabot) to the Secretary of State
[Received July 20—3:38 p. m.]
A–626. The continuing easy willingness to demonstrate or riot has been further demonstrated in Shanghai during the last few days, outbreaks having taken place in several quarters.
The chronic sense of fear and uncertainty is being heightened with the approach of the first semi-monthly announcement of the COL95 index, due on July 15. Wage earners are worried lest some figure as unrealistic as that of June 30 deprive them of the means of meeting their subsistence requirements. Employers are worried lest a more realistic figure drive them into bankruptcy. Those responsible for public order are worried on two counts. If the index is too low, trouble may be expected from the workers. Some prophesy street rioting and looting. If the index is too high, bankrupt concerns will close their doors and thus create hordes of unemployed who may be expected to cause trouble. Bankers and others are worried because of the acute shortage of banknotes. The Central Bank is now rationing notes to commercial banks at about 60 per cent of requirements.
It is reported that the authorities will desert all economic formulae in determining the July 15 COL index and base their figure almost [Page 360] solely on political expediency. If a fine compromise is reached between labor and employer requirements, Shanghai may pass still another crisis without disorder. But the tempo of the debacle is increasing at an alarming rate. Reports have reached the Consulate that certain powers within the Government are laying plans to direct any possible disorders into anti-foreign channels, thus protecting the Government from the brunt of the attack and at the same time attempting to convince the U. S. Government that activities of subversive elements require immediate intervention to check Communism. If this unconfirmed rumor is true, as it may well be, the Consulate General believes that all of the other forces which play on the Shanghai masses in their particular interests and for their particular purposes will help stir the stew to a point where the several causes and forces will be hard to distinguish. This has happened in the past under much calmer conditions.
- Cost of living.↩