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

No. 1108

The Ambassador has the honor to refer to despatch No. 756 of May 27, 1947 reporting developments in connection with the registration of American rights to real property and, in continuance thereof, to submit the following information regarding the status of negotiations with the Chinese authorities concerning the recognition of rights to real property outside of the so-called treaty ports owned by American citizens.

Following the presentation of an aide-mémoire on May 5, 1947 (enclosure No. 331 to the Embassy’s despatch under reference) no further written approach was made to the Ministry of Foreign Affairs regarding the basic question of recognition of American beneficial ownership of property outside the treaty ports until October 4, 1947, although special problems in connection with the registration of property rights were brought to the attention of the Ministry from time to time. During this period officers of the Ministry of Foreign Affairs dealing with this question assured representatives of the Embassy that the position of the Ministry continued to be as expressed during a conference with the Foreign Minister on May 5, [Page 1402] 194732 (enclosure No. 232a to despatch under reference) and that active efforts were being made to obtain the agreement of the Ministry of Land Administration and the Ministry of Justice.

In a letter dated September 3, 1947 the Standard Vacuum Oil Company outlined to the Embassy difficulties which it had encountered, particularly in Hupeh Province, in attempting to register property owned by it in the name of Chinese agents or nominees. It will be noted from this letter, a copy of which is enclosed,33 that the Bureau of Land Administration of the Hupeh Provincial Government appeared to insist upon a transfer of the property from the Chinese agent or nominee in whose name it was registered to the company in accordance with the provisions of the Chinese land law as a prerequisite to registration of the property in the name of the company. A copy of the Embassy’s reply to the Company, dated September 25, 1947, is likewise enclosed. In a note dated October 4, 1947 the Embassy brought to the attention of the Ministry of Foreign Affairs the difficulties being encountered by the Standard Vacuum Oil Company in attempting to register its property and took the occasion offered thereby to emphasize the mounting apprehension on the part of American businessmen and property owners as to the intent of the Chinese Government with regard to registration of property owned by Americans in the name of Chinese agents and the desirability of reaching a satisfactory and equitable solution of the problem as soon as possible. A reply from the Ministry of Foreign Affairs, dated October 18, 1947, stated that measures for the solution of the problem had been drawn up by the Ministry in conjunction with the competent authorities and were being submitted to the Chinese Government for consideration and approval and continued that before these measures were approved action in connection with the registration of the Standard Vacuum Oil Company’s right to property might be deferred. Copies of the above-mentioned communications are enclosed.

There are likewise enclosed memoranda of conversations between an officer of the Embassy and officials of the Ministry of Foreign Affairs dated October 8, 1947, October 25, and November 7, 1947. From these memoranda, it will be noted that the proposals of the Ministry of Foreign Affairs, which the Embassy understands to have substantially embodied the views expressed during the May 5 conference with the Foreign Minister, were submitted to the Executive Yuan and were opposed by the Ministry of Land Administration, [Page 1403] allegedly for reasons set forth in the memorandum of October 25, 1947, with the result the Executive Yuan failed to approve the proposals.

The Ministry of Foreign Affairs has, in the face of this development, suggested a new formula, the substance of which is outlined in the memorandum of November 7, 1947. The Director of the Treaty Department, in outlining the proposed formula and inviting the informal comments of the Embassy, observed that the formula itself had not as yet been presented to either the Ministry of Land Administration or the Ministry of Justice.

It will be noted that the proposal contains a provision that a transfer of the property from the Chinese agent or nominee in whose name it is registered to the American beneficial owner be recorded with the appropriate land bureau. While this provision may in part meet the objections of the Ministry of Land Administration that failure to record such transfer would leave a hiatus in its records, from the American point of view it is extremely important, for obvious reasons, that the transfer be fixed definitely as having occurred at the time the American beneficial owner commenced to enjoy and exercise the rights and privileges of ownership rather than at the time of recording. If this point of view is accepted and if the nature of evidence of ownership to be presented by the American beneficial owner is broadened in the manner suggested in the memorandum, the Embassy believes that the formula might offer a satisfactory solution from the American viewpoint.

Although the proposed formula does not require the consent of the Chinese registered owner in recording the transfer of property and applying for a title deed, it does afford the registered owner, or other claimant, an opportunity to contest the application. It should be recognized that in the event other claimants appear with evidence of ownership, the Land Bureau concerned would probably consider itself incompetent to weigh conflicting evidence and settlement of the resulting controversy would probably require judicial action or direct negotiation between the parties. This procedure offers the possibility of a form of extortion under threat of involving the American beneficial owner in a nuisance court action, but the Embassy believes that the procedure in principle is not unjust and probably is unavoidable.

The Embassy anticipates that the formula under discussion, more or less modified to meet the objections of the other concerned departments of the Chinese Government, will be presented by the Ministry of Foreign Affairs to the Executive Yuan for approval and that after approval by the Executive Yuan it will be transmitted to the Embassy as a formal reply to the Embassy’s note of February 17, 1947 (enclosure [Page 1404] No. 11 to despatch No. 545 dated March 7, 194734). The Embassy believes that it should not insist upon a formal acceptance of the views expressed in its note of February 17, 1947, should the Chinese evolve a formula which gives reasonable promise of achieving the same result, but that it should unmistakably reserve its position as set forth in that note while observing whether the formula in application adequately protects American beneficial owners.

  1. Not printed.
  2. Substance of the Foreign Office position was reported in despatch No. 756, May 27, from the Ambassador in China, p. 1392.
  3. Not printed.
  4. Enclosures to this despatch not printed.
  5. Neither printed.