661.9331/9–1649: Telegram
The Consul at Shanghai (McConaughy) to the Secretary of State
[Received September 18—7:39 p. m.]
3889. Info mytel 3747, September 9,35 strongly suggests Soviets, in conformity consistent postwar economic policy, using new Soviet-Manchuria trade pact get soybeans (possibly bristles, furs, other NE commodities) not for own consumption as alleged by Chinese Communist apologists, mytel 3731, September 9,36 but to sell on world market as means acquiring foreign exchange at China’s expense (mytel 2538, June 2936).
During war, USA bought over million pounds camel wool, cashmere each from USSR, origin Chinese Central Asia, Murmansk port shipment. Postwar, Soviets bought up with occupation money large amounts bristles, furs, casings in north Manchuria, substantial quantities shipped London, New York. Early 1947 USSR got fair amounts bristles from central trust on barter, part dumped in London. In ’46 and ’47 Soviets dumped enough Manchurian kolinski in New York to lower market price. Above reported by Tientsin 1945–48 inclusive.
Lower prices offered by Soviets for soybean shipments ex-Dairen than obtainable from Chinese Communists direct ex-Chinwangtao, [Page 968] Hulutao, Antung or Newchwang, attributed to lower freight rates, also suggests Soviets have rigged rail tariffs in favor Dairen as disguised subsidy. Also likely Chinese Communists, in order meet commitments to Soviets under new trade pact, forced to subsidize producers direct to cover difference between actual production costs and amounts credited by Soviets to Chinese Communists on barter deals, either through increases in Tung Pei Bank credits or by enlarging NE note issue. North China soybean prices reported 10 percent above world market. See mytel 3477, August 26.37
If above analysis correct, Soviet “totalitarian monopoly” has clearly outdone past performances foreign “imperialist monopoly capitalists” in exploitation of “colonial areas,” the more brazen due Soviet handling on inter-governmental basis. Through new pact, Soviets appear firmly entrenched as “monopoly middlemen,” thus cutting out “wasteful competition” of Chinese Communists themselves in latter’s efforts enter world markets direct. Soviet performance also outdoes Japanese exploitation Manchuria as Japs at least made large capital investments build up Manchurian economy and assumed big administrative responsibilities, which Soviets handle by remote control. Unlikely Soviets intend restore Japanese machinery equipment taken as war booty, much less add new equipment. Note also Soviets may regard British purchases soybeans [as] tacit British acquiescence in new “Soviet mandate for Manchuria” represented by trade pact.
Soviet imports caviar, chocolate, large quantities cheap cotton textile North China whether on barter [or] otherwise, reminiscent Nazi barter deals with satellites, especially as Soviet textiles compete unfairly directly wih Communist-run CTII38 North China mills. Only Soviet aspirin, cameras needed complete picture. Soviets also shipped 4,000 tons POL into Tientsin last spring by rail, or half tanker load. How much oil Soviets delivering NE/North China now? Soviet deliveries machinery North China, NE reported uniformly poor materials, workmanship, antiquated design.
ConGen presumes Department has reviewed with British Soviet trade policies Manchuria discussed mytels 2538, June 2937 and 2346, June 18 in relation Soviet-Manchuria trade pact.
ConGen also suggests VOA prepare special feature supplementing recent VOA broadcast on pact named, which appeared to American Commercial Attaché as very well done based on Ta Kung Pao defense Soviet aggression Manchuria, mytel 3731, September 9,37 supplemented by exchange letters re advantages for Chinese in Soviet-Manchuria [Page 969] pact, mytel 3731, September 8 [9] for which above comments possibly useful.
USSR reported dickering for 3,000 tons carpet sheep wool in Tientsin, possibly prelude to Soviet-North China barter deal.