893.5034 Registration/10–645: Telegram

The Chargé in China (Robertson) to the Secretary of State

1738. Department’s views expressed in telegam 1526, September 24, 7 p.m., were conveyed upon receipt September 27 to Dr. Sun Fo, President Legislative Yuan. Assistant Commercial Attaché was informed by Dr. Sun Fo, however, that the provisions of the law had already been approved and that the suggested changes accordingly could not be made. Formality of a third reading in Legislative Yuan was completed September 29 with no change made in draft law as it stood after the second reading on September 14. The law is now awaiting promulgation by Executive Yuan and is to be enforced from January 1946.

Embassy has shared Department’s apprehension with respect to provisions in company law which depend upon interpretative comments rather than upon clear and explicit statement. It is convinced, however, that this aspect of law is calculated and is intended mainly to allow Ministry of Economic Affairs to retain discretionary powers. In this respect revised company law appears to evidence what many discern as growing tendency toward policy of state control of China’s economic development.

Dr. Sun expressed view that article 7 (quoted in Embassy’s telegram 1611, September 18, 9 a.m.) would not disqualify from authorization to do business in China the branch of any foreign company wishing to engage in export or import trade. It was intended mainly, he explained, to prevent the authorization (registration) as foreign companies of enterprises which would do business entirely within China. Such enterprises in his view should be organized as companies under Chinese law.

To an inquiry concerning the status of China Trade Act companies, Dr. Sun replied that if such companies actually were engaged in [Page 1242] bringing goods from the U. S. to China or in exporting Chinese goods no difficulties would arise. It would not be possible, however, for a China Trade Act company to qualify if its business was to be done solely within territory of China. To a further question concerning the status, say, of the Shanghai Power Company under this interpretation, Dr. Sun Fo replied, “Of course, this company will have to be reorganized as a Chinese company.”

On October 1, Dr. Chang Chao-yuan supplied Embassy with two copies revised company law and stated that he would undertake an English translation of the entire law to be completed in several weeks’ time. The Embassy has completed a translation of the articles which apply to foreign companies and will forward it to Department with comments after translation is checked with Dr. Chang. Copy of Chinese text is also being forwarded for Department of Commerce54 in response to Department’s telegram 1511, September 21.55

  1. Despatch No. 813, October 22, not printed.
  2. Not printed.