893.50/336: Telegram

The Chargé in China ( Atcheson ) to the Secretary of State

1729. CEC resolution on industrial reconstruction (Embassy’s 1728, September 16) apparently points to continuation and increase of Government monopolies and control over industry which has been indicated in recent years. The National Government is expected to reserve to itself heavy industry on grounds of its relation to national defense, and to leave to private enterprise light industry as less suitable to Government operation. The resolution leaves to governmental decision which industries shall be private enterprise, which state operated [Page 867] and which state owned, and existing Government monopolies are therefore expected to continue. The encouragement and protection of the law for private industry envisaged in the resolution probably look toward protective tariffs, the necessity for which the Chinese press has recently emphasized. The establishment of Government socialized control of Chinese industry may meet strong opposition from Chinese industrialists who during war time have been powerless to prevent governmental encroachments in their field and who may be expected to become more vocal after the war and their return to the coastal areas.

It is likely that the recognized need for foreign capital in China’s reconstruction caused the adoption of a relatively liberal policy toward foreign investment and that it was felt desirable to take this step in order to counteract many unofficial and semi-official press articles of extreme nationalistic tone published in recent months. A responsible Chinese official informs us that the resolution represents a genuine liberal attitude among Government leaders toward foreign investment in China and, necessarily, has Chiang Kai-shek’s hearty support. The adoption of this policy toward foreign investment, together with the CEC resolution on constitutional government,30 gives further indication of the extent to which the Chinese Government is dependent upon the United States and is sensitive to American criticism.

  1. See telegram No. 1706, September 14, p. 335.