811.503193/122
The Ambassador in China (Gauss) to the Secretary of State
[Received April 20.]
Sir: I have the honor to report that Mr. J. A. Keane, Regional Director—Far East, United States Steel Export Company, has recently left Chungking enroute to the U. S. after a visit here of some four months, and supplementing the Embassy’s despatch No. 2312, March 15, 1944, to summarize below additional comments on his visit which he recently made to an officer of the Embassy.
Mr. Keane was told by Dr. Wong Wen-hao, Minister of Economic Affairs, that there would be no difficulty in connection with the establishment by U. S. Steel interests of a sales office in China should the company desire to set up such an office, and that it would only be necessary to register with the Chinese authorities the local office (or local company, if one were organized)—not the New York head [Page 1050] office. Mr. Keane seems to feel, however, that post-war China will be so poor that it will be impractical for his organization to operate here, either now or in the immediate postwar period, on a conventional basis of selling its products to consumers, either government or private.
Mr. Keane left Chungking apparently convinced that the only practicable means for his company to operate in post-war China is as a partner of Chinese Government-controlled organizations. He stated that when he saw the Generalissimo he brought up four matters: (1) the steel company project sponsored by Dr. Wong Wen-hao; (2) the China Bridge Company project; (3) the private railway company project sponsored by Dr. Tseng Yang-fu, and (4) the question of cooperation with private enterprise, with special reference to the Ming Sun Company’s project for the construction of a ship-yard (all four mentioned in the Embassy’s despatch under reference). The Generalissimo appeared to be favorably disposed toward the first three projects but refused to discuss the fourth, dismissing the whole subject of foreign investment in private Chinese industry as a domestic concern of China. This attitude was, of course, inconsistent with his approving attitude in regard to the private railway company scheme.
In spite of its surprising nature, the Generalissimo seemed to be familiar with and inclined to favor the private railway company project, although his conception of it was somewhat more modest than Dr. Tseng’s. He indicated, for instance, that the company’s sphere of operations would, at least in the beginning, be confined to the southeast and, specifically, should start with the construction of a relatively short line in the Kweilin area, materials for which were said to be available in China. Dr. Tseng desired, therefore, that the contribution of the U. S. Steel interests for this first project be purely financial, a figure of US$16 million being mentioned.
Many projects were proposed to Mr. Keane during his stay here but with the exception of (1) and (2) above most of them appeared to be based on the assumption that the U. S. Steel Corporation would be willing to invest in Chinese enterprises on more or less the same basis as the American Government now extends Lend-Lease aid. He said, for instance, that he had been asked by the China Automotive Company (an officially controlled company in which the Ministry of Communications has a large interest) to approach General Motors or some other large American automotive concern with a proposal that the American company construct a plant (assumably an assembly plant) effective control of which would be in the hands of the China Automotive Company, repayment of capital and interest to the American company to be made over a ten year period. Even the Ming Sun Company, the only private company with which Mr. Keane had detailed discussions, envisaged retaining a degree of control over its proposed [Page 1051] ship-yard project which Mr. Keane considered would be unacceptable to his principals.
Mr. Keane’s experiences would appear to indicate that, with the notable exception of Dr. Wong Wen-hao, the views of most Chinese political and industrial leaders on the participation of private foreign capital in post-war Chinese industrial development are unrealistic to a degree. Even in the highest circles these leaders appear to be concerned chiefly with promoting their own selfish interests and seem to cherish a conviction, or at least a well defined hope, that private foreign interests will be willing to invest in Chinese industry on what those interests would doubtless consider an altruistic basis. Until the Chinese are convinced of the lack of realism of this attitude, which is also prevalent in the military and political fields, it is difficult to see how satisfactory Sino-American relationships in any of these fields can be established.
Respectfully yours,