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

No. 49

The Ambassador has the honor to refer to despatch No. 1108 of November 18, 19472 and other previous correspondence regarding the registration of rights to real property owned by Americans in China and to enclose3 the Chinese text and an English translation of a note dated January 24, 1948 which has been received from the Ministry of Foreign Affairs. The note transmits the text of a ruling by the Executive Yuan regarding the registration of property acquired outside of the “treaty ports” by foreign nationals and registered in the name of Chinese nominees or agents. The ruling is restricted in application to nationals of foreign countries which have signed treaties of equality with China and applies only to property acquired prior to the signing of such treaties.

This ruling, which is the result of continuous negotiation and effort by the Embassy extending over the past year, implicitly recognizes that American owners who registered their properties in the name of Chinese did acquire rights of ownership to the property and that these rights are entitled to legal protection. This constitutes a significant advance over the original Chinese view that such asserted rights were illegally or fraudulently acquired and hence not entitled to legal protection.

As anticipated in the Embassy’s despatch under reference, the Ministry of Foreign Affairs does not commit itself with regard to the views expressed in our note of February 17, 19474 that property rights of the nature under discussion are fully protected by the 1943 Treaty5 but rather establishes a procedure whereby beneficial owners may register their property and obtain title deeds in their own names.

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In our opinion it is of the utmost importance in any procedure involving even a pro forma transfer of property from the Chinese registered owner to the American beneficial owner that the transfer be considered to have taken place when the American owner commenced to enjoy the rights and privileges of ownership and not at the time of recording and that application for recording the transfer not require the consent or concurrence of the Chinese registered owner. During our discussions with Foreign Office officials, we have repeatedly emphasized these views. The ruling of the Executive Yuan, unfortunately, is not clear regarding these points; consequently, whether the ruling will afford adequate protection to American rights will depend upon the way in which the Land Administration interprets and applies it.

The Embassy officer to whom the Ministry’s note was handed commented to the Director of the Treaty Department6 regarding the unfortunate ambiguity of the note with respect to these important points, and was assured that although the Ministry of Land Administration had opposed throughout the adoption of the ruling, that ministry, in view of the nature of discussion in the Executive Yuan, would probably not implement it in a manner which we would find unsatisfactory. He added that he anticipated no difficulty with the Land Administration, which is an administrative agency of the Chinese Government and hence amenable to the wishes of the Executive Yuan, but that he was somewhat apprehensive that the Courts may fail to uphold the Executive Yuan ruling. With this in mind he is preparing for the Supreme Court abstracts of pertinent material held by the Ministry of Foreign Affairs in the hope that the Court may be moved to issue instructions to the subordinate courts which would forestall an unfavorable decision.

A circular instruction has been sent to the several consular officers in China transmitting the text of the Ministry’s note and cautioning consular officers to follow closely the implementation of the ruling and to report any development which might result in a denial to American beneficial owners of their rights. A copy of this circular instruction is enclosed.

In our reply to the Ministry, a copy of which is enclosed, we have confined ourselves to expressing the earnest hope that the measures will be so implemented as to prove a satisfactory solution of the long standing problem of beneficial ownership and to reiterating and reserving our position as set forth in our note of February 17, 1947.

Should the implementation of the measures approved by the Executive Yuan offer in practice adequate protection for American owners, [Page 729]the Department may wish to give consideration to the issuance of a suitable press release calling attention of American property owners to the intention of the Chinese Government to require progressively the registration of real property in China and warning them that they should take steps to keep themselves informed, either personally or through their agents and representatives, of the establishment of registration requirements within the districts in which they own property.

  1. Foreign Relations, 1947, vol. vii, p. 1401.
  2. Enclosures mentioned in this despatch not printed.
  3. No. 721, not printed.
  4. Treaty Relinquishing Extraterritorial Rights in China and the Regulation of Related Matters, signed at Washington, January 11, 1943, Department of State Treaty Series No. 984, or 57 Stat. (pt. 2) 767.
  5. Hu Ching-yu.