711.932/12

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

No. 2411

Sir: By instruction no. 551, March 8, 1944, the Department requested the opinion of the Embassy as to its understanding of the right of British, Belgian and Norwegian nationals to “acquire and hold real property” in China under the terms of the recent British, Belgian and Norwegian treaties with this country.

The right to “acquire and hold real property” in China is included in the annexes to the British and Norwegian treaties; as to Belgium, it appears in the treaty itself (Article XI). There has been nothing to indicate that Britons, Belgians and Norwegians may expect to acquire and hold real property on precisely the same terms as Chinese nationals. The treaty provisions merely state that such nationals shall enjoy the right to acquire and hold real property “in accordance with the conditions and requirements prescribed in the laws and regulations” of China.

That it was the intention of the Chinese that there should be at least some restriction on the right of aliens to hold and dispose of land-holdings in China is shown elsewhere in the treaties. Specifically, the American,11 British, Belgian and Norwegian treaties all carry the stipulation that “existing rights and titles to real property in China” shall be subject to the laws and regulations of the Republic of China concerning taxation, national defense, and the right of eminent domain and that “no such rights or titles may be alienated to the Government or nationals (including companies—the American treaty reads ‘corporations or associations’) of any third country without the express [Page 1012]consent of the Government of the Republic of China.” It is reasonable to believe that while this treaty provision applies specifically only to present landholdings by aliens in China, it is the intention of the Chinese Government that a similar restriction shall be extended to alien landholdings acquired in the future.

At the time of the negotiation of the treaty with Britain, I understand, it was explained that the restriction on alienation of existing foreign titles was intended to prevent or control the possible transfer of such existing landholdings to Japanese. The Chinese probably also had in mind that the right of aliens to hold land in China should be restricted to nationals of those countries which permit the acquisition of land within their territories by Chinese nationals.

It may be of some interest to the Department to examine the Land Law of China, promulgated on June 30, 1930, at a time when the Chinese Government was conducting negotiations with the principal foreign Powers for the relinquishment of extraterritoriality and the readjustment of Sino-foreign relations.

Articles 7 and 8, Chapter II, Section I of the Law will be found of interest in their provision for private land ownership and the exclusion from private ownership of certain domain.

Article 17 provides that the following lands cannot be “transferred, encumbered or leased” to foreigners: (a) agricultural land, (b) forest land, (c) pastures, (d) fisheries, (e) salt deposits, (f) mineral areas, and (g) fortified and garrisoned areas as well as land along the frontiers of China.

The reference here is only to transfers, encumbrances and leases. But Article 33, Chapter I, Section 2 of the Land Law appears to recognize the “acquisition, establishment, transfer, modification or extinction” of the following types of “cadastral rights”: (a) ownership, (b) superficies, (c) right of perpetual lease, (d) servitudes, (e) pignorative rights, and (f) hypothecary rights.

The Law for the Enforcement of the Land Law, promulgated April 5, 1935, to be enforced from March 1, 1936, provides:

Art. 10. “No transfer, establishment, encumbrance, or lease of cadastral rights, which are not permissible under the treaties, may be made to foreigners …”12

Art. 11. “If foreigners lease land in accordance with the treaties but violate the provisions of the treaties regarding the object of the lease, the proper controlling land office may cancel the lease.”

So far as I can ascertain, there is nothing in existing Chinese law which would prohibit aliens from acquiring and holding real property in China, if permissible under the treaties, except as shown above.

My British colleague tells me that there has been no occasion, so [Page 1013]far, to take up with the Chinese Government any application by British nationals to acquire land in free China.

This Embassy has had no occasion to give consideration to any case except the acquisition of land under perpetual lease for missionary purposes. We have had one or two cases where the local authorities have held up completion of the issuance of leases in perpetuity for land for missionary purposes, alleging that under our Treaty leases in perpetuity are no longer to be issued. In these cases we have made informal representations to the Foreign Office which has undertaken to instruct the local authorities to complete the issuance of the leases in perpetuity, leaving for the future the form of exchange of such leases for other forms of title as contemplated by the Treaty.

We have understood that the matter of regulations governing land-holdings by aliens in China was being given consideration, but there has so far been no official indication of the general principles to be adopted.

It was recently reported that the several Ministries of the National Government and certain Party organs studying the position of foreign capital in post-war China had made recommendations to the Legislative Yuan on this subject (reference Embassy’s despatch no. 2379, March 30, 1944, entitled “Proposed Regulations Governing the Postwar Investment of Foreign Capital in China”13). In these recommendations—the authenticity of which has not yet been verified and which is in considerable doubt—there was stated to have been included the following proposal regarding rules to govern the right of aliens to acquire land in China:

1.
The alien who wishes to buy or to lease land should, together with the owner of the land, ask the hsien (district) government for approval and report to the National Government for registration. The same procedure should be applied upon transfer of such land.
2.
The alien wishing to buy or to lease land should tender the approval certificate given by the National Government to the hsien (district) government for examination; the hsien government will then assist him in buying or leasing and report the transaction to the National Government for registration.
3.
Land bought or leased by aliens shall enjoy the rights and be subject to the obligations of Chinese laws and regulations.

It is likely that the Chinese Government will impose certain restrictions upon foreign landholdings, of a regulatory character, designed to require prior National Government approval before land is acquired and before it may be transferred. Such restrictions should not prove onerous, provided the Government is reasonable and prompt in acting upon formal applications for approval and the control is not entrusted to venal officials.

[Page 1014]

I took occasion recently to mention the matter of the right of certain treaty nationals to acquire and hold real property in China, to the Minister for Foreign Affairs and to inquire whether the Government has yet taken steps to implement the treaty provisions and to lay down the procedure to be followed. I enclose a copy of a memorandum14 of my conversation with Dr. Soong, from which it will be noted that, according to his information, this matter recently came before the Executive Yuan and was referred for the consideration of the Supreme National Defense Council, which apparently has taken no action. Dr. Soong expressed the “off the record” opinion that the official Chinese Government position in the matter likely would not “crystallize” until the Government is actually faced with the problem by application of aliens, under the treaties, to acquire and hold real property in China. It will also be noted from the memorandum that there are certain Chinese elements opposed to granting to aliens the right to acquire and hold property; but I do not believe that these reactionary elements will be able to dominate the Government and prevent the carrying out of its legal obligation under the British, Belgian and Norwegian treaties, to permit persons of those nationalities to acquire and hold real property in China for legitimate purposes.

This subject of landholding is not unrelated to the general question of foreign capital investment in China and post-war commercial relations. The Chinese attitude on these problems has not, to use the expression of the Foreign Minister, “crystallized”. As appears from my telegrams to the Department, I believe that we should, as soon as possible, proceed to lay before the National Government a draft of a proposed commercial treaty providing the foundations for post-war Sino-American commercial relations. I am of the opinion that such a treaty should include provision for landholdings by Americans in China along the lines of Article 1 of the Treaty of 1937 between the United States and Siam.15

Respectfully yours,

C. E. Gauss
  1. Treaty on relinquishment of extraterritorial rights in China, signed at Washington, January 11, 1943, Department of State Treaty Series No. 984, or 57 Stat. 767.
  2. Omission indicated in the original despatch.
  3. Post, p. 1046.
  4. Dated April 5, not printed.
  5. Treaty of friendship, commerce, and navigation signed at Bangkok, November 13, 1937, Treaty Series No. 940, or 53 Stat. 1731.