893.50/12–844
Memorandum of Conversation, by the Adviser on Economic Affairs of the Embassy in China (Sumner)61
| Present: | Dr. Sun Fo, President, Legislative Yuan |
| Mr. Percy Chen, Attorney | |
| Dr. Sumner, Advisor on Economic Affairs. |
The statement of general principles governing postwar economic policy, reportedly approved by the Supreme National Defense Council early in November, was described by Dr. Sun Fo in a recent Chungking address (see Embassy telegram no. 197462). Speaking before the Rotary Club on November 30, the President of the Legislative Yuan said that the statement recently issued in New York on behalf of the Chinese delegates to the International Business Conference, is “in full accord with the latest decisions of the Government on the economic policy of postwar China”.
Dr. Sun Fo then enumerated thirteen points, which he described as his “own version” of the statement, and added “a brief commentary by way of clarification”. A copy of the full text of his address accompanies this memorandum.63
To obtain further information, I called on Dr. Sun Fo by appointment on December 3. His comments may be summarized as follows:
- 1.
- The statement on commercial policy, (which, according to Dr. T. F. Tsiang, was completed and transmitted to the Generalissimo on December 2), takes a position in favor of private enterprise, rather than government monopolization, in the conduct of foreign trade.
- 2.
- It is stated in point four of Dr. Sun’s address that all types of enterprise not exclusively reserved to the state shall be open to private enterprise. Dr. Sun Fo explained that a principal reason for this position, in addition to those stated in his address, is the fear that Government agencies would tend to pre-empt more projects than they would be able promptly to carry forward. He referred particularly [Page 1091] to mining claims, pointing out that Government pre-emption would often operate only to delay the development of important resources.
- 3.
- Difficulties in defining “heavy industries” and industries necessary to “national defense”, are given, following point four of the address, as an important reason for rejecting a policy of reserving such industries for development exclusively by the state. Point three, however, reserves to the state the development, inter alia, of “important” railways, and “large” hydro-electric projects.
- I asked Dr. Sun Fo whether similar difficulties would not arise in attempting to define “important” railways, and “large” hydro-electric works, and whether an absence of clarity would not militate against desired private investment in such projects. I was not able to obtain clarification of this point. Dr. Sun Fo did say, however, that the “importance” of a railway would be judged from political and other points of view not strictly economic in character. Apparently, therefore, it is not necessarily intended that the Government undertake all profitable developments, leaving to private enterprise only those of dubious promise.
- 4.
- As stated in point 11, both private and state owned enterprises may negotiate for foreign financing “through or with the approval of the competent Government authorities”. Dr. Sun Fo believes that private firms would be able to conduct their own financial negotiations subject only to notice to, and general authorization by, the Government. In other words, he did not believe the Government would monopolize all resort to foreign capital markets.
- 5.
- In point 12, there is reference to the possibility of granting “special charters” to foreign nationals for the carrying out of “certain special enterprises”. The only clarification of this statement was by illustration: Dr. Sun Fo said that upon recovery of Manchuria, certain Japanese steel plants might require reconstruction, and that a foreign firm could be given the exclusive right to rebuild such a plant and operate it for a period of, “say, thirty years”. At the end of that time its ownership would revert to the Government.
- 6.
- Dr. Sun Fo denied my suggestion that his description of the statement of general principle recognizes three industrial categories, i. e., industries reserved exclusively to the state, those reserved to private enterprise, and a middle group open to both public and private enterprise. He said the statement recognizes only two categories: those industries reserved to the state, and “all other industries”. Later in the conversation Dr. Sun Fo said he thought what I had termed a “middle group” might be termed a subdivision of “all other industries”.
- 7.
- There seemed to be general agreement when I stressed the importance, to China and the United States, of enabling American business to know as precisely as possible both the provisions of Chinese law, and the economic policies of the Chinese Government.