ment. It was stated to Mr. Granich that the Consulate General would when apprised of the facts in the case request the return of any American owned property seized by the police. There is accordingly enclosed herewith a copy of a self-explanatory letter dated September 7, 1937, together with a copy of the enclosure thereto,36 addressed to the Consulate General by Mr. Granich requesting the assistance of the Consulate General in obtaining the return of the magazines seized. On September 8, 1937, the Consulate General addressed an appropriate letter to the Acting Commissioner of Police of the Settlement requesting the return of the confiscated American owned property in question. Thus far the Consulate General has received no reply to its request. The magazine in question retails at ten cents Chinese currency per copy, and the value of the property seized in this instance amounts to approximately thirty cents United States currency.

Respectfully yours,

C. E. GAUSS

811.5034 (China) Eastern Publishing Co./30: Telegram

The Consul General at Shanghai (Gauss) to the Secretary of State

SHANGHAI, December 30, 1937-9 a. m. [Received December 30-7 a. m.]

1248. Reference my despatch No. 956 of September 11, 1937, and previous communications regarding "Voice of China" published by Eastern Publishing Company, owned by Max Granich. Settlement police report that Mr. and Mrs. Max Granich left Shanghai on December 21, 1937, on the steamship Ranpura destined for Marseille, France.

GAUSS

USE BY COMMUNIST PROPAGANDA AGENCIES IN CHINA OF AMERICAN OWNERSHIP, REAL OR SIMULATED, FOR PROTECTION

811.5034 China/412

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

No. 1158

PEIPING, March 26, 1937. [Received April 19.]

SIR: I have the honor to enclose for the information of the Department copies of confidential despatch No. 705 of March 16, 1937,37 from the Consul General at Shanghai s to the Embassy, in regard to

38

the apparent attempt on the part of the Soviet Government and/or the Third Internationale to disseminate Communist propaganda at Shanghai through local newspaper, radio, motion picture and book firms, which they endeavor to have registered at the American Consulate General as American concerns for purposes of protection.

The Department will recall that the Embassy transmitted to the Department with its despatch No. 1109 of March 9, 1937, copies of Shanghai's despatch to the Embassy No. 671 of February 25, 1937,99 regarding an attack made on the Isis Theatre, Shanghai, by a group of Italian sailors and civilians who apparently resented the exhibition of a Russian film, Abyssinia, relating to the Italian conquest of Abyssinia. Mr. Gauss stated therein that he had some reason to suspect that the Asia Films of China, the American firm responsible for the distribution of Abyssinia, might be but a facade set up to cover Soviet film distribution, in the same manner that he had reason to suspect that, in a small way at least, other Soviet activities in Shanghai might have been carried on under nominal American ownership. In his present despatch Mr. Gauss reports further instances to support his suspicions. He states that, being fully aware of the traditional American policy of freedom of speech and the press, interested Communist entities obtain the services of unscrupulous local American citizens, generally naturalized and having close Russian connections, to cover their Communist activities. Mr. Gauss adds that the attempts on the part of those desiring to disseminate propaganda at Shanghai under American protection have become so frequent and pronounced that he is concerned over the effect they will have on the friendly relations between the Consulate General and the local Chinese and other authorities.

Respectfully yours,

811.5034 China/417

For the Ambassador: FRANK P. LOCKHART Counselor of Embassy

The Ambassador in China (Johnson) to the Secretary of State No. 1215

PEIPING, May 5, 1937. [Received June 1.]

SIR: I have the honor to refer to the Embassy's confidential despatch No. 1158 of March 26, 1937, in regard to attempts to use the American flag to cover Communist propaganda in Shanghai, and to enclose for the information and files of the Department copies of Shanghai's confidential despatch to the Embassy No. 774 of April 27, 1937, concerning the American Book and Supply Company, Shanghai.

"Neither printed.

46 Not printed.

40

Mr. Gauss reports that on March 1, 1937, an official of the Municipality of Greater Shanghai (Chinese) called at the Consulate General and made complaint against the American Book and Supply Company, stating that it imports a Communist newspaper from Paris printed in Chinese and distributes it in the International Settlement of Shanghai. This oral complaint was followed by a written complaint from the Mayor, dated March 8. Mr. Gauss informed the Mayor in his reply of April 27 that it had been ascertained upon investigation that this firm was not an American concern and there was, therefore, no action that the Consulate General could take in regard to the complaint of the Chinese authorities.

The Embassy has informed Mr. Gauss that it approves the action taken by him.

Respectfully yours,

For the Ambassador:

FRANK P. LOCKHART Counselor of Embassy

PROBLEM OF CONTROLLING THE TRAFFIC IN OPIUM AND OTHER 41 NARCOTIC DRUGS IN CHINA "

893.114 Narcotics/1971

The Consul General at Shanghai (Gauss) to the Ambassador in China

No. 811

(Johnson) 42

SHANGHAI, May 18, 1937.

SIR: I have the honor to enclose, for the information and consideration of the Embassy, a copy of the Chinese text together with an English translation of a letter dated April 26, 1937, received from the Acting Mayor of the Municipality of Greater Shanghai on the subject of opium suppression. A booklet containing English translations of twelve sets of opium and narcotic laws and regulations enclosed with the above mentioned letter is also transmitted for the Embassy's information.

It will be noted that the Acting Mayor's communication quotes an instruction received from the President (General Chiang Kai-shek) of the Military Council of the National Government and concurrently Director General of Opium Suppression. The Generalissimo calls attention to the fact that "the number of Chinese opium smokers and consumers living in the foreign concessions (Shanghai) is quite large," and asserts that the authorities of the "foreign concessions"

41

42

"For previous correspondence, see Foreign Relations, 1936, vol. iv, pp. 565 ff. Copy transmitted to the Department by the Consul General at Shanghai in his despatch No. 779, May 18; received June 16.

43 Enclosures not printed.

should cooperate in seeing that Chinese opium addicts observe the Chinese opium suppression laws and ordinances. General Chiang's instruction proceeds, "cooperation should also be given in the matter of compliance by opium addicts with regulations to purchase and smoke opium on the basis of permits," and explains that "opium addicts living in the foreign concessions who have obtained such permits may temporarily purchase, for purposes of smoking, from the specially licensed opium hongs and retailers established outside the foreign concessions, opium bearing the revenue stamps issued by the Opium Suppression Supervisory Bureau or prepared opium covered by the invoices of opium hongs." Reference is also made to the question of the sale and transportation in the "foreign concessions" of so-called "illicit opium bearing no revenue stamps" and to those opium addicts smoking opium without permits, and finally to opium addicts possessing permits but smoking "illicit opium." Cases of this nature, it is stated, should be "turned over to the law courts for punishment according to the law." The instruction concludes with the statement that the Judicial Yuan has been ordered to issue appropriate instructions to the Special District Courts at Shanghai and directs the Acting Mayor to communicate with the various Consuls and to "submit for our examination and consideration a report setting forth the substance of the replies received from the various Consuls."

This communication was considered by the Consular Body at its meeting on May fourth and Mr. Fessenden, Secretary General of the Shanghai Municipal Council, who had been invited to attend, was asked to express his views on the general question of opium suppression in the Settlement. Mr. Fessenden stated that the problem was a very complex one, that without proper safeguards abuses would creep in and that, therefore, the Council would not depart from its policy of giving the subject very careful consideration before any decisions were made. He said, furthermore, that if any opium licenses were issued the Council would probably insist on issuing them and that if an arrangement were contemplated with the Chinese authorities the Council would probably consult the Consular Body about it. With reference to the question of the enforcement of the new opium laws on persons in the Settlement who are amenable to Chinese jurisdiction, Mr. Fessenden said it would be difficult to prevent the enforcement of these laws by the Chinese courts but pointed out that the Council would have to proceed cautiously since by consenting to licensing it would undoubtedly "bring a great deal of criticism on its head from missionaries and welfare bodies."

In this latter connection attention is invited to my despatch No. 576 of January 21, 1937, in which was set forth the opinion of the

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Municipal Advocate of the Shanghai Municipal Council that inasmuch as the provisional regulations governing the punishment of offenders against opium and narcotic suppression laws have been duly enacted and promulgated by the Chinese Government and do not appear to contravene the terms of Article 2 of the Court Rendition Agreement of February 17, 1930, the Shanghai Municipal Council has no option but to permit their application in the district court located in the International Settlement. It will be recalled, however, the Municipal Advocate pointed out that the administrative provisions of these regulations were not being enforced, particularly the requirements governing the registration of narcotic and opium addicts.

It was decided by the Consular Body (Circular No. 70-G-IV) that a copy of the Acting Mayor's communication should be forwarded to the Council requesting an expression of its views, and that identic replies should be made to the Acting Mayor upon receipt of the Council's reply and after further consideration of this question by the Consular Body. It was also agreed that the matter should be reported to the Diplomatic Body for possible reference to Geneva.

It appears to me that General Chiang's indirect request for the cooperation of the Settlement and French Concession authorities in the enforcement of the provisions of the new opium and narcotic suppression laws and regulations is concerned less with the question of suppression than with the problem of forcing addicts to purchase permits and their supplies of opium from bureaus and hongs licensed by the Government and to prevent the sale or transportation within the International Settlement and French Concession of "illicit opium," that is opium other than that controlled and taxed by the Opium Suppression Bureau. In short the real motive appears to be to increase revenues by drawing within the orbit of the Opium Suppression Bureau the opium traffic in the Settlement and French Concession. Nevertheless, consideration must be given to the fact that complete refusal to cooperate would be cited by the Chinese Government and its representatives at Geneva as evidence of the constant thwarting by the foreign consular and Settlement authorities of Shanghai of China's efforts to eradicate the opium and narcotic evils. Therefore, two courses appear possible. The one would be to agree to the enforcement by the Settlement and French Concession authorities of Chinese opium and narcotic laws and regulations against those amenable to Chinese jurisdiction. The other course would be to make no attempt to reply to the specific request contained in General Chiang's instruction to the Acting Mayor but to stress the desire of the Consular Body and of the Council to cooperate in