893.5034 Registration/10–2745: Telegram
The Chargé in China (Robertson) to the Secretary of State
[Received October 29—9:20 a.m.]
1877. ReDeptel 1708, Oct. 19, 7 p.m. Article on Revised Company Law in New York Times by Lieberman was based exclusively on his interview with Dr. Sun Fo, President Legislative Yuan, and Dr. Chang Chao-yuen, [Page 1248] drafter of law. Lieberman telephoned Embassy prior to filing despatch but Embassy declined to comment, especially since law had not yet been promulgated by Chinese Govt.
Copy of Lieberman’s despatch subsequently furnished Embassy appears to state authentically provisions of the Revised Company Law as approved by the Legislative Yuan. In some respects, however, the statement is incomplete and hence may give misleading impressions. For example, it is stated that half the shareholders and the chairman of the board of directors of an unlimited liability company must reside in China. This is true but (see Embtel 1746, Oct. 6) for the less exacting provisions which relate to limited liability share companies, the form of business organization mainly of interest to American business.
Lieberman’s statement of the views and interpretations of Dr. Sun Fo appear entirely accurate and Lieberman says that he secured latter’s approval of text of this article prior to sending it.
In accordance with Dept’s instruction, Embassy had made strongest appropriate representations to Dr. Sun Fo and to Legislative Yuan committee on points in draft law which appear prejudicial to trade and investment relations between United States and China. Especially is this so with respect to the requirement that a foreign corporation must transact business in the country of its origin in order to qualify for registration. It is known, however, that inclusion of this provision is one which is strongly approved in the Legislative Yuan and is intended to prevent Chinese or foreigners from incorporating companies abroad to do business solely within China.
It is understood that this provision would not prevent registration of any American company engaged in the export or import trade. Its interpretation and Chinese Govt policy generally in regard to the establishment in China of branches of American manufacturing concerns remains to be explicitly stated. Also its effects with respect to China Trade Act companies will require to be more definitely appraised. Embassy would welcome views of the Dept. and Dept. of Commerce on this latter point as well as any information concerning amendments in the China Trade Act which are now under consideration in Washington.
This publicity prior to promulgation of law (in early November) affords an opportunity to bring to the attention of Executive Yuan the provisions of the law which the Dept., the Dept. of Commerce and American business groups regard as mutually undesirable and without [Page 1249] prejudicing the Embassy’s relationship with Legislative Yuan. This is being done in accordance with Deptel 1709, Oct. 19, 7 p.m.63
Copy of Chinese text of Revised Company Law together with Embassy’s translation of relevant sections thereof and with more complete expression of Embassy’s evaluation of law was forwarded by airmail on Oct. 22, 1945. Reference despatch No. 802, Oct 17, 1945.
- Not printed.↩