811.503193/9–844
Memorandum by the Chief of the Division of Chinese Affairs (Vincent) to the Secretary of State
Mr. Secretary: It is understood that you have not yet had opportunity for an extended conversation with Dr. H. H. Kung, and, as it is believed that if and when such an opportunity does occur you will wish to take up with him matters of commercial policy, there are summarized below suggestions put forward by Ambassador Gauss in his telegram 1033 [1303], July 28 (attached).47a
The Ambassador suggests that pressure upon Kung offers the best hope of avoiding unwarranted Chinese restrictions on foreign business; that specific provisions against restrictive and illiberal economic policies should be incorporated in our proposed new commercial treaty with China which is now being drafted; that early presentation of the draft to the Chinese Government is advisable; that, notwithstanding China’s need for post-war economic assistance and our own desire to help China, the prospects of American economic assistance, governmental or private, will be seriously impaired if the Chinese Government persists in its present illiberal policies and tendencies toward state controls, et cetera; and that a commercial treaty would seem relatively useless unless the Chinese Government adopts liberal policies which can alone provide a sound basis for the collaboration which both nations desire.
The presence in the United States of Kung, whose advice the Generalissimo is more likely to heed than that of any other Chinese official, offers an exceptional opportunity to bring home to the Chinese Government realities of the situation. You may wish therefore to mention to Dr. Kung that reports from China indicate an unsatisfactory situation with regard to Chinese laws and regulations to govern foreign enterprise in China. Americans find the regulations unnecessarily restrictive and lacking in clarity. There is also a seeming Chinese conception that the principal task of the Government is to regulate and control the flow of American capital to China rather than to encourage that flow. In this connection Dr. Kung might be reminded of the famous statement of Li Ping, the ancient Chinese who constructed the irrigation works at Kwanhsien, Szechwan, several thousand years ago. He said: “Keep your dikes low and dig deep your ditches”. In general, you might wish to express the hope to Kung that China will at an early date initiate concrete measures to clarify to American businessmen the basis upon which they may be able to operate in China, pointing out that the breadth and liberality [Page 1073] of the basis upon which they may be able to operate will have much to do with the degree to which economic collaboration in the post-war period, so much desired by both Americans and Chinese, will develop in a mutually beneficial manner.