893.515/9–1648: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received September 16—6:59 a.m.]
1706. Subject: Sale to public of shares in Government enterprises. Chinese Government August 30 decided sell shares certain stateowned enterprises to private buyers for obvious purpose absorb floating capital but announced [in] order obtain funds with which to back new gold yuan currency introduced August 20. Companies involved include:
- (1)
- China Textile Industries Incorporated, assets of which reported total gold yuan $1,140 million but figure assertedly reduced to gold yuan $800 million in order attract public capital and guarantee dividends. Of shares totalling last amount, gold yuan $420 million slated to be handed over to Currency Supervisory Board (CSB) as backing for new currency, gold yuan $200 million to be sold to public, balance retained by CTII pending further decision by Government.
- (2)
- China Merchants Steam Navigation Company with assets reported undervalued at gold yuan $600 million; half of shares to be sold to public and half to be turned over CSB.
- (3)
- Taiwan Sugar Corporation with assets valued gold yuan $480 million; shares totalling gold yuan $172 million to be turned over to CSB, shares worth gold yuan $48 million to be sold to public, remainder held by company;
- (4)
- Taiwan Paper Company with assets valued gold yuan $80 million, of which gold yuan $32 million to be turned over to CSB, gold yuan $12 million sold to public, balance retained by company;
- (5)
- Tientsin Paper Pulp Company with assets valued gold yuan $20 million, with shares valued gold yuan $80 million to be turned over to CSB and shares gold yuan $4 million to be sold to public, remainder retained by company.
Summarizing, five companies concerned with estimated assets aggregating gold yuan $1,980 million scheduled issue shares for that amount with gold yuan $932 million slated to be handed over to CSB gold yuan $564 million to be sold, remainder held by companies. Latter clue to be reorganized into joint stock companies with expectation after certain proportion shares sold to public stockholders meeting will be called to elect representatives of public stockholders to serve on boards of directors.
Sales of shares to public first day (September 10) amounted to only gold yuan $1,242,000, according press, with total for September 10–14 reported at only gold yuan $2,960 million. Sales being made thus for [far] only in Shanghai through Chinese Government banks but sales to be extended other cities soon.
Shanghai Ta Kung Pao September 15 commenting on poor public demand for these shares gave following five reasons therefor:
- (1)
- As Government has retained too many shares (viz. 70% China Textiles, 90% Taiwan Sugar and 80% Taiwan Paper) public shareholders cannot hope to supervise operations and management;
- (2)
- With declared assets of certain companies in excess of newly fixed share capital, no data representing detailed assets and liabilities have been issued. Moreover, since no certified investigations on foregoing made by neutral parties, public confidence difficult to attain;
- (3)
- Government assertedly has given no indication as to legal status of these companies after reorganized and whether they will be individually operated or by direction of Government administrative organs;
- (4)
- Minimum denomination of shares for China Textile and Taiwan Sugar is five shares at face value of gold yuan $500, which said rather high and beyond purchasing power of small investors;
- (5)
- Finally most important point is question whether shares of these companies will hereafter appear on market. While generally believed they will, public hesitates buying non-negotiable shares.
Sent Department 1706, repeated Shanghai 813.