CURRENT ACTIVITIES OF THE CHINA EXPORT CORPORATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00457R008300480003-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: November 9, 2016
• Document Release Date: April 16, 1999
• Sequence Number: 3
• Publication Date: August 13, 1951
• Content Type: REPORT

Approved Forp~Release 1999/09/24: CIA-RDP82-00457R0083004800Q '9(
btASSIFICATIOI -"- T -4--l 'T ~; _?nn?r rtiT?~ 5. .-. .-_
COUNTRY
SUBJECT
DATE OF
INFO,
bn For failing to safeguard the Corporation's dollar funds properly.
T-, '11I ''~2CI T debacle
ca ~, 'For not ~. fioxeSeeinr the SS va ~ ,~.,..~ z8',
dd For raal .rg; insufficient deliveries to China as co.:ipac d. with the x~es z? us
achieved by other Caine-se purchasing agenciesn
e t For buying useless goods o
CLASSIFICArION
Zliz
CENTRAL INTELLIGENCE AGENCY . f
~ONF DEa
Gemany (Russian Zone(iestern ~,
Current _letivitics of the China Export
Coi-porati on
October 1950 - mid-=.r
BE
C
REPORT NO.
DATE DISTR..
13 August 1951
NO. OF PAGES
5
NO. OF ENCLS..
(LISTED BELOW)
NOT CIRCULATE PORT Rio e
Internal Difficulties
7.:, During April and Tlay 1951, rclations betveen the China Export Corporation,,
Gr1il9 of 3erlin,on the ono hand, and the China national kz }ort Corporation
of Tientsin and the iini --try for Forripa and lntor-nal. Trade, on the other
hand, deteriorated steadily. Ernst Er :n9 r=acing director of the China
;xrort Coax at _on9 now x alizes that the East German iiinistxy officials,
particularly Ti_inister Tlandl:e; his assistant, Eraznlow, fnu; and the 11inistxy's
representative in Peking, Tuerpe, fnu9 are siding with the Tientsin cot_Zpary
against hira.
2Q Erlacn has I cn attac1md on the foL orring principal grounds:
a. F or originallyy having invoiced goods shipped to Chin, at cost pr ~_ce
plies five porcent9 -iLi1e crediting Chirse exports at the for r October
195 0 prices o ., "~1 hough the China t ort Corporat7 cn has r.hade full anon ls,
Erben's personal pz sti? e has suffered considerably as a rocult of his
fraudulent rot'iod of accovntingo The :SDP '_Tinistayy officials T?.ho pro--
viously approved his r thods have now cc iplcte15 disassociaixd t':rerzselves
frosty thin(.
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OW
f , For i n d u l g i n g in personal extravaganceo Erben considers h self
he Chinese trade ambassador to Europe and is stated to have spent
smie 315,000 on clothing, travel, and other personal i.tcm$ e He recently
purc:lased a large Uercedes as a second personal care The furnish:Lngs
in his Berlin offices, including panelling and carpets, are valued at
bet-men X20,000 and )308000,
3, On the credit side, Erben is universally corended for the good prices and
tea
a beans
ese so
f Chi
,
,
y
n
prompt pants he has obtained on the sales o
silk, and other exports,
M Difficulties and Proposed Remedies
Almost all the large concerns which had agreed in principle to supply rolling
mill products, machines, chemicals, and surgical equipment to the Chinar
Export Corporation during 1951? had failed as of mid-May to deliver any goods
iatsoever,,
In the rolling mil sector, the 1951 requirements were or'i.ginaDT covered
"on. paper" as follow t
aA 30 percent of Otto WolffD including suppliers selling through, or in-
troduced by, Wolff (Ferrum, Saarbritokenp etc,);
b, 30 percent by Otto R. Krause, Dusseldorf (owned by Willy H. Schliecker),
including Ernst Meyer of Dusseldorf, Dr, Kroth of Ost,71est Handel, Berlin,,
and other associates;
c. ISO percent by a miscellanea-is groups, including potential sup'+liore
in France, Belgium,, Stiritzerland and elsewhere.
6. As of mid-ray, Otto ;tolff and Otto R. Krause had made no deliveries. Under
the 40 percent miscellaneous heading, the following deliveries have been
made:
Metalinport Trust, Zurich and Paris
35009000 36OO$~
33
Ocimex, Brussels
00,000
Gerimex, Berlin
Others, including Intrac and local Berlin traders
3300,000
7, In all other sectors (i.e., other than rolling mill products) deliveries
have not exceeded 9400,000, including goods bought from the DDR to a value
of about 110,000.
8. Until very recently, the China Export Corporation had hoped to open up the
following principal fields of supply:
a, Great Britain, on a free dollar export basis, with valid export licenses E ~n
giving the China Import Corporation of Tientsin as the end-users.
had hoped to obtain considerable quantities of semi,-strategic materials,
including railroad equipment, from Britain, However, the recent r asures
of the British Government with re gaad to exports to China have rudely
shaken his confidence.
b. France, on a free dollar export basis, vrith export licenses for India
and Ceylon obtained throufrii bribery. Erben has not given up hope entirely
in this direction, but at the moment is unable to find a suitable channel
to the competent -French authorities.,
c? From any western country' including possibly even the United States, via
the 'Middle at by means of the barter of Chinese ores against casings.,
tubing, steel sheet, etc;, In October 1950, Erben eras informed by the
China TlationaiilImport Corporation that a railroad line permitting the
overland shi%nent of high-grade tungsten and chrome ores ;7ould be in service
by March 1951, and that the China Exhort Corporation could then count
on regular supplies. Erbcr3 has now been informed that 70 percent of the
total Chinese output of tungsten and chrome ores has been rillocated for
1951 for export to other organizations, and that the China La;port Cor-
Appro F~~Pe~99991'~It 5' b f 9 3C
percent,
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3-
As.a result of these circumstances. the China Export Corporation relies
increasingly on clandestine baying. Laszlo Vasarhelyi of the European
Trading Company of Stockholm has had repeated conferences with Erben, and
it is likely that he will become the principal purchasing agent for the
China Export Corporation.
10. For smaller deliveries the China Export Corporation relies on Iietaliriport
Trust of Zurich and Paris and on Gerimex of Berlin. In cooperation with
the German trustee for east-west trade, Gerimex has discovered a method
of delivering goods to the China export Corporation within the terms of
the interzonal trade agreement. Erben, with his customary optimism, has
now earmar:md Geritnex for deliveries of most of his electrical equipment
requirements, valued at several million dollars. Gerimex has its own
separate steel safe in the China Export Corporation of ices, whcrc all its
files are kept.
11. Ernst L1ey~er~~'; of DUisseldorf continues to be a regular guest at the China
Export Corporation offices, where he always receives a most cordial reception.
.He also spends large sums entertaining Erben and other members of the staff.
The cordiality is difficult to explain since, according to the Corp'oration's
officials 9 Meyer has made no deliveries during 19510
12. Robert P. Schroeder of Ilamburg, litho refines and sells soya beans on behalf
of the Corporation, recently visited the United States. Erben is so pleased
with his efforts that he intends giving him the exclusive selling agency
for Chinese scra.beans4 This move may be complicated by the fact that DDR
Minister Georg Ilandke has accused Schroeder of making over 300,000 in. profits.
on his soya bean deals.
13, Ocimex of Brussels, which has received tea valued at 31,000,,000 from the
10 1.00,QOO recently remitted to the Corporation between 3300,01)0 and ? 009000
in cash. The China Export Corn oration has lost all confidence in Kratly9
the owner of Oci:ex and of Ancotraria, as a buyer, seller, and forwarding
agent,
14, The SS !'!O ;ELL1 arrived in Rotterdam on 15 May 195 with a cargo of soya
beans and sills for the China Export Corporation. The Corporation intends
selling this cargo for western DII's throui DI organizations in lestern
Germany. The cargo is valued at approximately '?2,000,00). Two further
vessels carrying soya beans, rice, and silk left Taku Dar during the last
week in April and first seed, in I.iay respectively.
Financial Notes
The China Export Corporation lost over )6,000,000 in funds blocked by the
Zurich Volksbank. Me greater part of this sump repre ?ents tie proceeds from
sales of soya beans by Schroeder. The monoy crag in tram-it at the Vo1.ksbank
for 40 hours only, since the Corporation intended using it for the opening
of letters of credit. The moray seas placed in transit at the Vol.-,sbank on
the personal order of Erben, despite warnings from the Deutsche Notenbank.
16. The China Export Corporation has another dollar account in its awn name at
the Volksbank which it can operate freely,, since the counterpart funds are
not deposited in the United States, but in 3svitzerland. As of mid-.Uay 1919
this account had a credit balance of 3010O,0019 366,OOO of which was being
remitted to Metalimport Trust. Zurich.
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17. The China Export Corporation has further dollar accounts in Switzerland,
registered in various names and numberso As of the middle of :ay 1951,
these accounts totalled betneen 3300,,OOO and ,"400,9000-
10. The Corporation's holdings of dollar bills in Berlin amounted in mid My
to appro:.imately w60.,00Oa It also held some 18000,000 western IT''s, some
of which were shortly to be transferred to Gerimex0
19. As soon as the SS I10:IELU's cargo has been sold,, Ernst :I,,amlorr, the financial
director of the China I zport Corporation, intends to visit Siaitzorland to
mare now financial arrangements there. Ile still plans to open an account
with Mans Celigman-SchUrch Zc Co 0 of Basel, and to open a small Zurich office
under a neutral name to replace Ilobro A.G.;
Visit of Chinese Delegation
200 The visit of a delegation of 17 Chinese engineers to Berlin has been anounced
for the first half of June 19514 It is probable that Tuerpe., the delegate of the DDR Ministry for Foreign and Internal Trade 8 will join this
delegations, which is to have extensive talks rrith officials of the China
Export Corporation. No details of the discussion agenda have as yet reached
the Corporation, beyond the intimation that the delegation will put forward
proposals for the shipment of goods to India and for transportation by rail.
Personnel Notes
21, The following notes have been received on personnel of the China Export
Corporation:
a. Ernst Erben, despite faults vhich have considerably reduced his prestige.,
particularly among DDR officials, is still regarded as being a capable
executive 0 His main faults are those of overconfidence$ overoptimismg
and the inability to concentrate sufficiently on any one problemo
Richter (fnu) is a complete nonentity and is not taken seriously by
anyone except Erben, whom he'serves as a favorite sycophant.
c0 Ernst I amlow is the most capable of all the Corporation's officials,
He appears to have been chosen by the SED Central Committee to koop
an eye on Erben0
d0 Lindholz (fnu) has proved himself to be the best of the senior clerks
(:tcferenten) and is the only one to have received an increase in salary,
Ram o 7 has every confidence in him, thile he is indispensable to R1chter.
e. Kupfer (fm) is the young and not particularly intelligent employee in
charge of the machines department, As of raid-4:ay he procured little
outside of tyro Diesel engines,, rtich acre rejected by Tientsin, He is
likely to be replaced by some one else,
f. ScIunid (fnu) is a new employee' moderately capable, to has been put
in charge of the chemical and surgical equipment departments.
g0 Sinecker (fnu) is another new employee,, in charge of the textile division.
He was formerly engaged by the DAIIA furs division. He spent sic months
in DDR prisons after a worker in his section at DAHA embezzled some furs
and escaped to West Berlin,
h. Brod (fnu) is a new man., formerly employed by Derutras, who has been placed
in charge of transportation,
i, Frau Krause (fnu) secretary to Erbens, is both capable and dangerous.
Through her husband she has direct contact with the Russians at Karlshorst0
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