893.5034 Registration/7–1944
The Ambassador in China (Gauss) to the Secretary of State
No. 2787
Chungking, July 19,
1944.
[Received August 14.]
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
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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
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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,
[Enclosure]
Memorandum of Conversation, by the Ambassador in
China (Gauss)
[Chungking,] July 13, 1944.
| 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
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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
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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
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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.
