893.5034 Registration/7–1944

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

No. 2787

Sir: With reference to the Department’s telegram no. 905 of July 3, 1 p.m. and my message, no. 1235 of July 18, 10 a.m., in regard to the registration of American firms in China, I have the honor to enclose memorandum of my conversation on July 13th, with Dr. Wong Wen-hao, Minister of Economic Affairs.

In this connection, I also refer to my despatch no. 2752 of July 8, 1944, enclosing an English translation of a memorandum25 from the Ministry of Economic Affairs in reply to the questions raised by the National Foreign Trade Council in their memorandum26 transmitted to the Embassy by the Department’s no. 628 of May 3, 1944.26

By way of additional clarification of several of the questions raised by the National Foreign Trade Council, I should point out that there are in China some municipalities located in the provinces which are, however, not under provincial control. For example, Chungking is a special municipality depending from the National Government and not from the Szechuan provincial government. In the same way, Shanghai was a special municipality under the National Government, in no way responsible to the Kiangsu provincial government. A foreign firm locating in Chungking would apply for registration through the Bureau of Social Affairs of the Chungking Municipality, while a foreign firm locating in Chengtu would apply through the provincial Bureau of Reconstruction. For practical purposes, special municipalities should be considered as areas separate and apart from the provinces in which they are located.

Another point which it is believed has been cleared up is the reference to “registration” and “licensing”. Under Chinese laws—such as the banking and insurance laws—it is required that companies engaging in special lines of business must be specially licensed so to do. Therefore, if a foreign company, for example, wished to engage in certain insurance business for which under Chinese law a special license would be required, that Company would need not only to obtain registration but also a license.

In my telegram of July 18, 10 a.m., I suggested to the Department that it would be helpful to the Embassy if information might be supplied showing the legal requirements for “registration” of foreign firms in the United States—requirements which may differ with the various State laws; and also the legal requirements of other foreign [Page 996]countries in reference to the “registration” of foreign firms and companies. This information would probably be useful in our conversations with the Ministry of Economic Affairs to persuade that Ministry that the Chinese registration requirements are onerous and unreasonable.

As to British firms, our inquiry develops the information that several British firms at Chungking are discussing the registration requirements with the Bureau of Social Affairs of the Chungking Municipal Government, and that they, like the American firms, find the requirements vague and unsatisfactory, and desire an extension of time for registration. The Commercial Counselor of the British Embassy informed an officer of this Embassy who inquired, that all British firms in Chungking are endeavoring to register, that they have made numerous calls on the head of the Bureau of Social Affairs of the Chungking Municipality, and that they have experienced the same difficulties as the American firms and also desire an extension of time. The Commercial Counselor, when informed that Dr. Wong Wen-hao had intimated to me that the period for registration would be extended until the end of this year, commented that this action confirmed his opinion that the Chinese authorities are in no hurry to have foreigners register branches of their firms in China. The Financial Counselor of the British Embassy in casual conversation with me some days ago said that he thought that if the Chinese Government could be persuaded to permit the registration of a firm with one National Government ministry, in this case, the Ministry of Economic Affairs, for one registration fee, such registration to be effective for all branches in the country, British firms would register.

Apparently the British Embassy has not been particularly active in regard to the matter of registration; and there has been a suggestion in some quarters that the British prefer to have the Americans “carry the ball” in the discussions with the Chinese on the registration requirements.

If the National Foreign Trade Councilor any other organization has further questions to put to the Ministry of Economic Affairs in connection with the registration requirements, the Embassy will, of course, be glad to transmit them and to translate and forward the replies.

I have noticed in the press that Dr. H. H. Kung, Vice President of the Executive Yuan and Minister of Finance, in his public statements and addresses in the United States, where he is now attending the Monetary and Financial Conference, has been rather generous in his assurances that American business interests will be welcome in post-war China. It might be desirable that some of those interests [Page 997]take occasion during Dr. Kung’s visit to let him know of their dissatisfaction with the official National Government attitude toward foreign business interests in China in the matter of vague and impractical regulations and reports of proposed extensive restrictions which will discourage rather than encourage American interests in the China field.

Respectfully yours,

C. E. Gauss
[Enclosure]

Memorandum of Conversation, by the Ambassador in China (Gauss)

Present: Dr. Wong Wen-hao, Minister of Economic Affairs
Mr. Gauss
Second Secretary Boehringer

I called by appointment on Dr. Wong this afternoon and raised the question of registration of American firms in China, making my approach along the lines of the Department’s telegram no. 905, July 3, 1 p.m.

Dr. Wong said that he had only known yesterday that the Bureau of Social Affairs of the Chungking Municipality had fixed July 31st as the registration dead-line; he realized that more time must be given; and in answer to my question as to what further extension would be allowed, he said he thought until about the end of the year.

Dr. Wong asked me whether I had received his letter27 and memorandum28 on the subject of registration of firms, replying to the memorandum I had sent him from the National Foreign Trade Council. I replied that I had received his letter and memorandum a few days after their date; that as they were in Chinese they required to be translated carefully into English; that this had necessarily taken some time; but the translations had gone off to Washington in our official mail today. I added that while his memorandum clarified some of the questions raised by the Foreign Trade Council, I believed some of the points still remained obscure and no doubt there would be further questions until something reasonably clear could be brought out of the present unsatisfactory situation.

I commented that his Ministry was applying to foreign firms Chinese legislation enacted during the period before the abolition of extraterritoriality; legislation actually intended to cover Chinese firms, and not readily adaptable to foreign firms. Our American interests have found the regulations ambiguous and onerous, and it is [Page 998]my information that American firms are extremely reluctant to proceed to register under them.

I pointed out that while former Commercial Attaché Richards had attempted to clarify some of the questions, the approach had merely resulted in misunderstanding—Mr. Richards had understood that the Chinese Government was proposing to enact new laws and regulations while on Dr. Wong’s side what he had meant was that the Chinese Government was proposing to enact new legislation regarding the incorporation or organization of companies under Chinese law—not new legislation or regulations regarding registration of foreign companies in China. There had consequently been a serious loss of time and misunderstanding.

In my conversation with Dr. Wong it was my endeavor constantly to distinguish between registration under Chinese law of foreign firms and their branches, and Chinese companies organized under Chinese law; but it was evident that he did not always carefully distinguish between these two classifications.

I reiterated to Dr. Wong that this matter of registration of American firms in China is of outstanding importance. This is the first contact of foreign interests with the Chinese Government since the abolition of extraterritoriality. Naturally, the attitude of the Chinese Government is being examined by American interests to determine whether China is disposed to follow liberal and reasonable commercial policies vis-à-vis foreign interests, or whether, as has repeatedly been reported to us, certain elements in China are determined to discourage American (or foreign) firms re-entering the China field. In my opinion, I said, it would be unwise from the Chinese standpoint to follow the latter course. China needs foreign assistance after this war. American interests, observing the treatment accorded to American firms which have done business in this country before and which contemplate reestablishing themselves, will determine whether they feel that the China field deserves their interest; unless it does, they will turn elsewhere. For example, I said, it is reported to us that certain elements in the Government are desirous of placing such restrictions on foreign banks that they will not find it attractive to come to (or reenter) the China field. Foreign banks are an important influence on other American interests. Those interests, if they find that American banks do not consider the China field safe, sound, and attractive—if they find that if they come here to participate in Chinese postwar reconstruction and industrialization they cannot have the assistance and information and estimates of the China field from American banks— will find other fields more attractive. China, I said, has not developed to the point where it can afford to be too restrictive in the attitude [Page 999]toward American interests. I recalled the large foreign (British) interest in our railways in the United States when they were built; and other large foreign interests in our industrial development. If America had not welcomed foreign investment, and given it full protection, our progress to our present financial and industrial strength would have been slow; foreign capital would not have been interested in the United States. Similarly, if China proposes to be unduly restrictive toward foreign interests, those interests will turn elsewhere than to China.

Dr. Wong pointed out that all he had to go on now are the present Chinese laws. He believed the registration requirements quite simple.

I replied that we did not find them so; that we found them complicated, ambiguous and onerous. There are a number of questions which must be solved. There is no need to mention them all at this time—and doubtless the Foreign Trade Council will have them later. But, for example, he made mention of “registration” and “licenses”. We could not understand whether a firm proposing to do business in China had to be licensed to do so and also had to effect registration. Just what was meant by these references. Dr. Wong said that licenses are required under Chinese law for some companies—for example, those proposing to do banking business or insurance business. Such firms when applying for registration must also be licensed; licensed to do the type of business they proposed to engage in, when Chinese law required such licensing. Here his Ministry would have to be in touch, for example, with the Ministry of Finance.

I commented that the registration requirements regarding “capital” of branches was peculiar; in the United States, so far as I am aware, branches of companies do not have separate branch capital. Dr. Wong said he thought this provision of Chinese law was similar to French or Swiss procedure.

I commented that, for example, his registration regulations require certain certifications from consuls. For ourselves, our consuls could not give such certificates; when an American consul gives a certificate it means something—it means that he can certify to certain facts as to which he is the official repository or custodian. Our corporation laws—48 States—vary; our consuls are not the registration offices for our States; our consuls cannot certify to the details of corporations organized under the several States; only the proper authorities of the States can do this. I suggested that some means will have to be found to overcome this difficulty for American firms; perhaps those firms could obtain the certificates from the proper authorities of their States and submit them by supporting affidavit—if necessary an affidavit executed before the consular officer. Dr. Wong said that something [Page 1000]like this would do—but of course the certificates would have to come from competent authorities.

Mr. Boehringer suggested that it would be desirable if the Ministry could get out a simple outline in English showing the various steps firms must take in regard to registration and licensing—something that would be helpful to firms in the United States considering registration. At present they have only translations of complicated Chinese laws and regulations which are in many cases ambiguous. Dr. Wong said that this possibly could be done—but of course the laws and regulations are Chinese—the letter of the law is Chinese and any such outline would have to be only by way of informal explanation; any questions would have to be resolved on the exact Chinese text and its meaning.

I finally asked Dr. Wong whether I could report to Washington that the period for registration of American firms had been extended to the end of the year so as to give our people more time to study the matter, to resolve questions, etc. Dr. Wong replied that I might inform Washington that extension to the end of the year is being made.

C. E. Gauss
  1. Latter not printed.
  2. Not printed.
  3. Not printed.
  4. Dated June 23, p. 992.
  5. Not printed.