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

928. Recent petroleum developments such as Anglo-Iranian crude contract and assumption supervision by Anglo of rehabilitation Takao refinery (Shanghai A–684 Sept 1717) disquieting particularly in relation probable future trading conditions China market. It is felt here that intensified coalescence China Petroleum Corp operations [Page 1390] as above evidenced foreshadows hardening of trading relationships between CPC and foreign Cos with possibility that CPC might resort to use of regulatory powers if competitive conditions react their disadvantage.

1944 Resolution Supreme National Defense Council (your airgram Sept 418) states in effect under Section 2 par 5 that Govt commercial enterprises mixed or simple shall be treated same as private enterprises so far as concerns their rights and obligations. Suggest Emb ascertain or satisfy itself that this still “guiding principle” of Chinese General Economic Reconstruction Plan and if so whether it means what Dept considers it should mean that Govt enterprises will not be granted functions privileges not accorded private enterprise.

Basing presentation on above resolution if valid basis as well as on reasons outlined Deptel 484, July 19, Dept believes Emb should again urge Chinese authorities transfer CPC regulatory powers to disinterested agency seeking at same time assurances that future trading conditions will follow above “guiding principle” affording private Cos parity with CPC in every respect consistent with basic laws.

  1. Not printed.
  2. A–91, p. 1386.