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

No. 53

Sir: The appointed Ambassador has the honor to transmit herewith a copy of an article regarding postwar policy toward economic enterprises which appeared in the Government sponsored National Herald, English language newspaper of Chungking, December 29, 1944.

The article quotes a statement attributed to a spokesman of the Supreme National Defense Council. When asked by a member of the Embassy for a copy of the policy statement agreed upon by the Council, General Wu Te-chen, Secretary-General of the Central Executive Committee of the Kuomintang, replied that it had appeared in the press on December 29th. It is believed, therefore, that the press statement was fully authorized.

It may be remarked that the contents of the statement as published in the National Herald conform closely to information contained in previously transmitted memoranda of conversations between Government and Party leaders, and members of the Embassy. It is consistent also with the statements of Dr. Sun Fo2 in a recent address. A copy of his statement was enclosed with despatch no. 3212, on December 8, 1944,3 entitled “Address by Dr. Sun Fo on China’s Postwar Economic Policy.”


Chinese Statement on Postwar Economic Policy

The following appeared in the National Herald, Government sponsored English language newspaper in Chungking, December 29, 1944.

[Page 1333]

General Principles on Economic Enterprises Outlined by SNDC4

“The task of China’s economic reconstruction must be undertaken along the lines of planning in accordance with the teachings of Dr. Sun Yat-sen5 so that free economic development under a General Reconstruction Plan will eventually lead to the establishment of the economic system prescribed in the Three Principles of the Peoples, a spokesman of the Supreme National Defence Council told the Central News yesterday.

“In the future all possible measures, he continued, should be taken to encourage free enterprise in so far as they are not inconsistent with the principles of the ‘regulation of capital’. Various means should also be devised to attract foreign capital, which is to be utilized in China in the spirit of fostering international economic cooperation on the basis of equality and reciprocity, provided that such cooperation does not prove detrimental to our sovereign rights or to the realization of our Economic Plan. In this manner it is hoped that free enterprise will furnish an impetus to the economic development of China and help hasten the consummation of our Reconstruction Plan.

“The spokesman then revealed the following guiding principles for economic enterprises adopted at the 148th meeting of the Standing Committee of the Council:

  • “I. The industrial development of China should be carried out along two lines:

    “(1) by private enterprises and (2) by state enterprises.

  • “II. In order to facilitate the division of labor under the General Plan for Economic Reconstruction the following provisions concerning economic enterprises are to be observed:
    • “(1) The kinds of state monopolies should not be too numerous. Such monopolies include inter alia (a) postal service and tele-communications, (b) arsenals, (c) mints, (d) principal railroads and (e) large-scale hydraulic power plants.
    • “(2) Private capital may engage in any enterprise other than state monopolies.
    • “(3) The Government may, on its own account or in cooperation with Chinese or foreign capital, engage enterprises which private capital is not fully capable of developing or which the Government regards as being of special importance, such as large-scale petroleum fields, steel plants, air and water transportation, etc.
    • “(4) All enterprises which are operated by the Government in cooperation with Chinese or foreign capital should be organized in the form of business corporations. The Government, apart from exercising such administrative supervision as is provided by law, is entitled to participate in the management of all matters relating to [Page 1334] the business, finance and personnel of such corporations solely in its capacity as a shareholder.
    • “(5) With the exception of state monopolies, all enterprises operated by the Government, whether with or without the cooperation of Chinese or foreign capital, in so far as they are of a commercial character, should, as regards their rights and obligations, be treated in same manner as private enterprises of a like character.
  • “III. The establishment of any important private enterprise should, according to law, be submitted to the examination and approval of the Government on the basis of the General Plan for Economic Reconstruction. (Important matters to be considered include: location of the projected plant, production capacity, kind and quality of output, issuance of shares and bonds, etc.)
  • “To all private enterprises that conform to the General Plan for Economic Reconstruction the Government should give special encouragement including financial aid and technical and transportation facilities, so that they may achieve their scheduled progress.
  • “IV. No restriction shall be placed on the percentage of foreign share of capital in any Sino-foreign enterprise. In the organization of such a corporation it shall not be made a fixed rule that the General Manager be a Chinese, although the Chairman of the Board of Directors must be a Chinese.
  • “V. State enterprises may contract foreign loans or seek foreign investments through competent Government organs provided that they first be approved by the Government on the basis of the General Plan for Economic Reconstruction. Private enterprises may also directly undertake such negotiations, provided that similar approval of the competent government organs is obtained.
  • “VI. All enterprises in China which are directly financed and operated by foreign nationals on their own account should observe Chinese laws and regulations. In the case of certain special enterprises which would require special authorization for their establishment and operations, special charters of franchises may be granted to foreign nations upon application to and approval by the Chinese Government.
  • “VII. Persons in the government service prohibited to participate in the operation and management of any enterprise that falls within the scope of their supervisory functions.
  • “Concluding, the spokesman pointed out that as it seems inevitable that the existing laws and regulations concerned will in certain cases be found to be in conflict with the above-stated principles, the matter should be referred to the Legislative Yuan for revision with a view to harmonizing all existing legislation on the subject.”

  1. President of the Chinese Legislative Yuan.
  2. Not printed; for a summary of this address, see telegram No. 1974, December 8, 1944, from the Chargé in China, Foreign Relations, 1944, vol. vi, p. 1092.
  3. Supreme National Defense Council.
  4. Founder of the Kuomintang (Nationalist Party).