811.503193/2–1347: Telegram

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

178. Joint memo by China-America Council and National Foreign Trade Council1 re state control of industry asks clarification Chinese attitude following points:

(1) which fields industry will be open to direct investment American capital (2) which reserved as Govt monopolies (3) which will Govt operate alongside private; what assurance Govt enterprises not to get preference re taxes, allocations, etc., (4) which fields will there be joint Govt-private operations; (5) which (aside from Govt monopolies) closed to foreign corps.
What assurance to prospective US business interests in China that (1) new laws, orders or taxes will not be enacted preventing operation at reasonable profit (2) profits will be remittable to US and exchange provided for purchase abroad of essential operating goods and services (3) local regulations will not be imposed preventing operation on sound basis.

In reply2 Dept has cited Embassy’s continuing efforts in stressing to Chinese importance of delineating fields of foreign enterprise and of clarifying conditions under which such enterprise can operate.

Suggest at your discretion you discuss with Chinese problems raised by these questions, emphasizing anxiety of American business re effect on them of Chinese Govt policy and report fully Chinese reaction.

Memo also cites present preferred status for Govt (vs private) in some industries (textile mills, petroleum, etc.) re loans and re allocation of foreign exchange and of raw materials. See also A–l from Tientsin to Embassy Jan 43 last sentence sixth para. Emb’s comments will be appreciated. Full text of joint memorandum [Page 1370] which also contains proposed loan formula being forwarded air pouch.4

  1. Dated December 20, 1946, not printed.
  2. Dated January 21, 1947, not printed.
  3. Airgram not printed; it indicated that no allocations of coal were being made for foreign enterprises in Tientsin, although large allocations were made for local Chinese Government monopolies (893.00/1–447).
  4. Copy transmitted to the Embassy in China in instruction No. 292, March 25; not printed.