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

No. 335

Sir: I have the honor to transmit a memorandum of conversation25 of April 17 between Mr. Kan Nai-kuang, Deputy Secretary General of the Supreme National Defense Council, and a member of the Embassy, regarding the meaning of certain provisions in the Defense Council’s statement of “General Principles on Economic Enterprise During the First Period of Reconstruction”. This statement of postwar economic [Page 1342] policy was transmitted with the Embassy’s despatch no. 53, January 3, 1945. The conversation which is the subject of this despatch was in relation to written questions which were given to Mr. Kan in advance of the discussion.

Summary: Mr. Kan’s comments may be summarized as follows: (1) No additions are presently contemplated to the list of industries mentioned in the Council’s statement as being reserved for Government operation. (2) Industries in which the Government may engage, other than those reserved to it, will be determined from time to time, and will probably be enumerated in policy statements. (3) Governmental as well as private enterprises should be subject to approval under the “General Plan for Economic Reconstruction”. (4) The “important” enterprises which must be submitted for approval under the Plan may in fact be those of companies proposing to engage in businesses regarded as of sufficient importance to be included in the Plan. (5) It would seem necessary to have the plan govern the expansion of existing enterprises in businesses subject to it, although it is unlikely that existing enterprises would, under the provisions of the Plan, be forced to curtail their operations. (6) While the Defense Council’s statement of General Principles provides for public assistance to enterprises approved under the Plan for Reconstruction, such assistance should be available equally to previously established enterprises. The principles governing assistance or subsidy require future study and it is proposed to send three representatives of the Legislative Yuan abroad to study this and other questions involved in the control of business by the Government. (7) It is intended that the general manager of a Sino-foreign enterprise need not be a Chinese, thus removing a previous limitation of the Chinese company law. The English translation “it shall not be a fixed rule that the General Manager shall be a Chinese”, is somewhat misleading. (8) While Mr. Kan expressed the belief that the statement of General Principles is intended to permit wholly foreign-owned firms freely to engage in business in China, subject to stated limitations, it is not clear that such firms would receive treatment equal in all respects to that accorded Chinese enterprises. (9) No clear definition exists of the circumstances under which “special charters” would be required before a company would be authorized to do business in China. Such charters might be required in the case of large-scale enterprises in which the Government is expressly interested. (10) It is not expected that the General Plan for Reconstruction would be made operative until a year after the end of the war. It may be that some sections of the Plan would be placed in effect before the whole of it is ready to be made operative. End of Summary.

It is believed that in most of his replies, Mr. Kan was expressing a personal opinion. It is also believed that numerous issues regarding the precise meaning of the statement of General Principles remain undetermined.

Respectfully yours,

For the Ambassador:
Ellis O. Briggs
  1. Not printed.
  2. Economic Counselor.