Office of the Historian

393.115 Associated American, Industries/6: Telegram

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

Shanghai, October 6, 1938—4 p.m.
[Received 5:10 p.m.]

1302. Reference Department’s No. 491, August 17, 4 p.m. and Shanghai’s No. 1189, September 3, 4 p.m.5 regarding lease of Chinese enterprises by Associated American Industries.

1.
Allman, president of the company, informs me that while the company has heretofore experienced no difficulty in obtaining any necessary Japanese passes or permits it has now been told that the Japanese authorities require that the American Consul General inform them that the company’s leases and operating agreements are legal and in order. He therefore now seeks our support.
2.
The company is a Delaware corporation organized in February of this year with an authorized capital of 100,000 United States dollars and a paid up capital of 25,000 United States dollars of which 15,000 represents American shareholdings and 10,000 Chinese. The general manager is a local American businessman of satisfactory reputation. [Page 490] The company now employs 11 Americans including several men of technical training and experience.
3.
Allman states that the company was formed principally for the purpose of rebuilding and arranging for re-equipping of Chinese factories and their operation under leases and operating agreements which it is estimated will in most cases run for about 5 years. The company is already operating a flour mill inside the Settlement and is effecting repairs of a dyestuffs and chemical factory and Sung Sing cotton mills numbers 1 and 8 outside the Settlement proper. American architects and engineers and technical assistants are being employed.
4.
No extensive re-equipment of the mills is being undertaken at this time, such measures being reserved for more normal conditions. The operating agreements contemplate that the mill properties shall be used as security for financing where necessary and it is my understanding that operating capital will be borrowed from Chinese banks.
5.
So far the company is operating only in the Shanghai area although one or two plants that will be operated at Shanghai have branch plants at Hankow.
6.
Allman states that while legally it should not be necessary to have authority from the Japanese to operate, in practice it is found necessary to obtain Japanese passes to move materials and employees in areas under Japanese occupation. This is a fact.
7.
The American company apparently contemplates actual American operation and control in good faith of the Chinese enterprises concerned under leases and operating agreements extending over terms of about 5 years.

[Here follow various other details regarding the American company.]

Early instructions [are requested] as to the extent of protection I may afford this company.

Repeated to Chungking, by mail to Peiping.

Gauss
  1. Latter not printed.↩