811.20 Defense (M)/10207: Telegram
The Ambassador in China (Gauss) to the Secretary of State
[Received November 12—10:15 a.m.]
1315. Department’s 1017, October 31, 7 p.m. For Metals Reserve. Matters in reference telegram have been discussed with official of National Resources Commission who was already informed regarding proposed alteration of tungsten contract and discussion with respect to tin. Quite naturally he adopted same attitude as Mr. Yin with regard to tin price rather unconvincingly supporting contention that China should receive same price as Bolivia. It is true that Chinese production cost of tin in terms of United States dollars is high but this is due to unrealistic rate between Chinese and United States dollars (20 to 1 when 80 to 1 would be more in line with actual value). Thus production cost of 80,000 Chinese dollars per ton becomes United States dollars 4,000. With regard to your subparagraph 3, Chinese are not in a position to consider making deliveries to ports on the west coast of India.
In discussions on tin, it should be borne in mind that it is impracticable to refine Yunnan tin, which forms bulk of Chinese tin, to standard quality of 99.8 or even 99.7. The quality varies between 99 and 99.6. Tin produced in Kwangsi (about 2000 tons annually) can be refined to 99.7 and sometimes higher. But the tin which the Chinese contemplate our taking is from the stocks in Yunnan where about 10,000 tons are refined annually.
Reference is made to Embassy’s telegrams number 1247, October 31, 9 a.m. [1 p.m.] and 1293, November 6, 11 a.m.35 The Russians are anxious to take all the Chinese tin ex-warehouse Kunming that can be transported out by plane. It appears that determination of [Page 669] price to Russians is awaiting the outcome of our discussions, the Chinese maintaining that the Russians should pay. It is suggested that settlement in Washington of question of relative urgency of Russian and our need for tin be settled before proceeding further with our discussions with Chinese regarding tin.
Production of tungsten is proceeding at average rate of 1000 tons a month and it is expected that this average will be maintained in 1943. However, until present facilities are improved, we cannot count on delivery to planes of much more than 500 tons a month. Chinese promise to take all available measures to improve transportation. After handling mercury for Russia (about 80 tons), silk for Britain (about 15 tons) and whatever amount of long length bristles, we may purchase in the future, tin for Russia and/or for United States would constitute balance of cargo for planes to make up deficiency of tungsten cargo.
- Latter not printed.↩