893.50/12–2744
Memorandum of Conversation, by the Adviser on Economic Affairs of the Embassy in China (Sumner)66
As previously reported (see enclosure to despatch No. 3212, December 8, 194467), a statement of general principles governing the postwar economic policy of China is expected to be issued in the near future. In order to obtain further information with regard to its contents I called on Mr. Kan Nai-kuang, Deputy Secretary General of the Supreme National Defense Council, on December 22. The appointment was arranged by General Wu Te-chen, Secretary General of the Council, who stated that Mr. Kan had taken an important part in the preparation of the statement.
The following points were developed in the course of the conversation:
I. Mr. Kan regards the statement of general principles as expressing a policy of “planned liberalism”, intended to avoid both the wastes of laissez-faire capitalism and the extreme authoritarianism of Soviet Russia.
He described the statement as covering four principal matters:
- (1)
- Definition of the area reserved for state monopoly.
- (2)
- Reservation by the state of the right to enter other important industries that attempt in advance to define precisely the industry involved.
- (3)
- Clarification of the position of private enterprise.
- (4)
- Clarification of the position of foreign investment.
The statement, he predicted, would be issued in a “few days”.
II. I commented that Dr. Sun Fo’s address, as well as other information coming to me, would suggest that the statement does not include a declaration of principles with respect to the postwar commercial policy of China, and asked whether this impression is correct. Mr. Kan stated that the question of commercial policy would be covered in a separate statement. He refused to predict when such a statement would be ready. Nor would he comment on its present status.
III. I asked Mr. Kan about the significance of the “overall plan” of economic development referred to in Dr. Sun Fo’s address, and its relation to the statement of general principles. He indicated that an [Page 1097] “overall plan” is being developed by the Central Planning Board, and is in an advanced stage of preparation. He said that the use of such a plan would constitute an integral part of China’s postwar policy.
Mr. Kan further stated that a decision has been made to invite “several” American experts to China to assist in the final formulation of the plan. He said that at least one such person had been appointed, and that the Government is making arrangements for quarters.…
When I suggested that, in the absence of a completed plan, foreign investment would be discouraged by reason of uncertainty, Mr. Kan stated that this difficulty has been recognized. In the absence of a completed plan, or in the absence of a position with respect to a particular industry in such a plan, foreign investment would nevertheless be welcome. Once made, the rights associated with such investments would be recognized even though the plan were subsequently extended to cover the industry or industries in question.
Mr. Kan referred to the “overall plan” as a “guide”. He did not, however, explain how the plan could be regarded on the one hand as only a guide, and on the other hand as a major instrument in controlling the future industrial development of China.
IV. In Dr. Sun Fo’s address the categories reserved for state monopolization include “important” railways and “large” hydro-electric establishments. I asked Mr. Kan how these categories might be defined. The only clarification obtained was his statement that “important railways” would mean “trunk lines” and that “small” railways would be open to private investments.
V. Dr. Sun Fo’s address (point 12) referred to the granting of “special charters” for particular undertakings that may be carried out by private enterprise. I referred to the use in the United States, particularly in the case of public utilities, of special charters as a means of regulating industry with respect to such matters as the rates to be charged. I asked whether a similar policy was contemplated in China. Mr. Kan said that, to the contrary, special charters were envisaged as a means of conferring additional rights, as an inducement to private investment, rather than as a means of regulating the operation of private enterprises.
VI. When I commented on the need for clarification of Chinese law, Mr. Kan agreed and stated that work is in process to make translations available, and that existing law might have to be modified where necessary to implement policies agreed upon.