893.6363/10–2249: Telegram
The Consul General at Shanghai (McConaughy) to the Secretary of State
[Received October 22—3:22 a. m.]
4481. Consulate General understands Chinese Petroleum Company approaching all three major oil companies Shanghai for delivery POL in tanker lots. Such sales would be most disadvantageous to position local offices foreign oil companies in meeting large payrolls. Hence, local understanding reached to reject CPC offers in c.i.f. Shanghai basis without local currency margins to cover local expenses.
Contract, cited Deptel 2124, October 19,60 would appear particularly undesirable as giving CPC excessive share in Chinese [Page 1030] market as against some 15 to 20 percent under ECA. Such shipments would tend impair ability foreign companies to cover Shanghai operating costs without head office remittances presumably affecting Shanghai office Caltex equally with Stanvac and Shell.
In consequence this contract, Shell might attempt bulk sales from NEI61 with more than US $4 per ton freight advantage, thus giving Communists benefit price cutting, other competitive advantages at expense all established foreign companies.