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

No. 187

Sir: In accordance with the request in the Department’s air mail instruction no. 27 of February 2, 1945,7 to be kept currently informed concerning developments in China’s plans for economic reconstruction, I have the honor to transmit two statements8 by Dr. Sun Fo pertaining to this subject: The first is a translation, revised by Dr. Sun Fo at the Embassy’s request, of his address of January 18, 1945, before the International Economic Association in Chungking, entitled “Guiding Principles for China’s Postwar Reconstruction”. This address contains a discussion of principles adopted by the Supreme Council of National Defense on November 6, 1944.* The second is an interview with Dr. Sun Fo concerning postwar economic policy which appeared in the Shanghai Evening Post and Mercury, Chungking, February 18. A member of the Embassy was informed by Dr. Sun Fo that he had read and approved this interview before its publication.

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Summary of address: Basic principles for China’s postwar industrialization were approved by the Supreme Council of National Defense on November 6, 1944. China cannot unqualifiedly adopt the Anglo-American system of free private enterprise because industrialization under that system would be too slow to meet the urgent requirements of national defense and world peace. At the same time, China cannot adopt the Soviet system in its entirety since the adoption of that system in Russia was possible only after violent internal revolution. China, therefore, will employ the most important principle of the Soviet system, i. e. a general economic plan, while welcoming the expansion of private investment under that plan.

Government monopolization will be limited to a few industries including large hydro-electric plants, important railways, and telecommunications. All industries not monopolized by the state are open to private investment. In industries open to private investment the state may engage in enterprises not capable of private development, or which are regarded by the government as of special importance. Illustrations are large petroleum fields, steel plants, and air and water transportation. When the government, either alone or in partnership with Chinese or foreign capital, operates such enterprises it shall be subject to the same obligations and enjoy the same rights as private enterprises of a like character. Thus, the fear expressed in a recent editorial of the New York Journal of Commerce, that private business in China will face subsidized government competition, is unwarranted.

To expedite industrialization, foreign nationals may be granted special charters in the case of enterprises which require special authorization for their establishment or operation. Foreign capital may be invested directly in enterprises, without the participation of Chinese capital. Foreign investors will have equality before the law with Chinese nationals. Both state and private enterprise may negotiate or contract foreign loans or investments provided they are first approved by the Government on the basis of the general plan for economic reconstruction.

Summary of interview: Government foreign trade monopolies will be abolished after the war, and the conduct of foreign trade will be entirely in private hands. Government regulation will be necessary to conserve external resources for important uses. In part, this may be done by a tariff policy which would impose rather high duties on luxuries, while admitting such items as machinery free of duty. In regard to economic planning, one current proposal is to have a modified War Production Board with power to map out production needs and “steer” private industry into desired channels. This would ensure that first consideration is given to the general welfare, and would ordinarily benefit rather than harm private companies.

Respectfully yours,

George Atcheson, Jr.
  1. Not printed.
  2. Neither printed.
  3. An English translation of these principles, released by a spokesman of the Defense Council, appeared in the National Herald and was transmitted with Embassy despatch no. 53, January 3, 1945. An earlier address by Dr. Sun Fo regarding these principles was transmitted with Embassy’s despatch no. 3212 of December 8, 1944. See also Embassy’s despatch no. 38 of December 27, 1944. [Footnote in the original; despatches Nos. 3212 and 38 not printed.]