893.50/9–546: Airgram

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

A–91. Under date of August 29, Dr. Wong Wen-hao, Vice President of the Executive Yuan, addressed a further communication to Mr. Butterworth on the general subject of the economic policy of the Chinese Government. He called attention to the reference he made in his letter of August 20, contained in A–89 of August 26, 1946, regarding the 1944 Resolution of the Supreme National Defense Council and enclosed a translation thereof. As of possible interest to the Department, it is transcribed below:

“The task of China’s economic reconstruction must be undertaken along the lines of planning in accordance with the teachings of Dr. Sun Yat-sen, in a way 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.16

“In the future all possible measures should be taken to encourage free enterprise in so far as they are not inconsistent with the principles of ‘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 economic development of China and help hasten the consummation of our Reconstruction Plan.

“Guiding principles for economic enterprises adopted at the 148th meeting of the standing Committee of the Council:

The industrial development of China should be carried out along two lines:
By private enterprises, and
By state enterprises.
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:
The kinds of state monopolies should not be too numerous. Such monopolies include inter alia (a) postal service and telecommunications, (b) arsenals, (c) mints, (d) principal railroads and (e) large-scale hydraulic power plants.
Private capital may engage in any enterprise other than state monopolies.
The Government may, on its own account or in cooperation with Chinese or foreign capital, engage in 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.
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 the business, finance and personnel of such corporations solely in its capacity as shareholder.
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 the same manner as private enterprises of a like character.
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 program.
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.
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.
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 [Page 1388] would require special authorization for their establishment and operation, special charters of [or] franchises may be granted to foreign nations upon application to and approval by the Chinese Government.
Persons in the Government service are prohibited to participate in the operation and management of enterprises that fall within the scope of their supervisory functions.”

  1. The San Min Chu I of Sun Yat-sen were published before his death at Peking, March 12, 1925, and form a basic part of Kuomintang (Nationalist Party) policy.