Foreign Relations of the United States, 1949, The Far East: China, Volume IX

893.5034 Registration/4–649

The Consul General at Shanghai (Cabot) to the Secretary of State

Shanghai, April 6, 1949.
[Received April 19.]

No. 178

I have the honor to refer to my restricted Despatch No. 150 of March 25, secret Report No. 37 of March 28, and secret Despatch No. 167 of April 3[4].⁵⁶

The recent issuance of consular posters to American organizations within the city of Shanghai gives rise to a number of considerations, some of which have already been discussed in the above-cited communications. Of basic importance is the fact that the issuance of consular posters, even though such posters are in the form of mere identification of posted property as being American, carries connotations of commitment to take further consular action and to assume further protective responsibility for the posted property. Such commitments, naturally, assume continuance of the status of the property as American. In the light of this consideration, poster issuance cannot be considered merely as an Isolated act. It is, in fact, a present commitment to protect in the future the property posted.

The Consulate General proposes to issue posters only when the recipient is one to whom the Consulate General would expect to extend full consular protection. While such determinations are difficult to make on a hypothetical basis before the occurrence of actual cases, it seems clear that normally the utmost possible protection within the limits of consular authority would be extended to all organizations which are completely American-owned, regardless of the activities in which an organization may be engaged, provided, of course, such activities are legitimate and are not contrary to American national objectives.

However, there are many organizations which are not completely American-owned and which present problems of determination as to the extent of consular protection which would be justified. In this connection, the following comments appear appropriate:

(1) Individuals. It is proposed to issue posters to all individuals who have satisfactorily established their American citizenship and have registered with the Consulate General except those of Chinese origin who may still be considered by the Chinese authorities as Chinese nationals. In this connection, it is to be noted that the laws of China do not permit voluntary expatriation by unilateral act of Chinese nationals. A Chinese must petition the Government for approval of renunciation of Chinese citizenship, and only after such approval is granted does the Chinese Government technically recognize the severance of the ties of citizenship.

(2) Partnerships. Partnerships by their very nature involve such intimate relationships among the partners that it is often impossible to divide up the interests of the partners in the firm so as to protect only such interests as are American, when there are also partners of other nationalities. In such cases, the American partner has an undivided and indivisible interest in all property of the firm. The most charitable view would be that the presence of an American partner affects the entire firm with an American interest justifying full consular protection. However, the Consulate General feels that such cases of multi-national firms should be best determined on an ad hoc basis. However, the Department’s advice would be appreciated, having particular reference to the partnerships listed in Tabulation No. 2 enclosed with Despatch No. 150 of March 25, 1949. For instance, where the partnership is 50% American and 50% Chinese, should such partnership be considered as in the nature of a Chinese-American individual so far as the indivisible firm’s interests are concerned?

(3) Corporations. The Consulate General is of the opinion that when an enterprise incorporated in the United States is owned by Americans who hold more than 50% of the stock, full protection should be granted in the absence of any other contravening consideration. Where Americans do not hold more than half the stock, protection may still be granted, consideration being given to the following points.

(a) Do Americans own more stock than any other one nationality?

(b) Are the holders of stock so distributed that American stockholders dominate this corporation (as, for instance, by the stock being concentrated in relatively few American hands)?

(c) Is a majority of the stock, including that held by Americans, owned by non-Chinese nationals, such as British, French, etc.?

(d) Is American management dominant in the operation of the corporation?

(e) Is the corporation generally considered as American in the local community?

(f) Does the corporation further U.S.-China trade?

(g) Does the corporation otherwise further American interests and American foreign policy?

Factors in the nature of the foregoing may help in deciding the extent of American interest where financial interest does not exceed 50% and thus aid in determining the advisability of issuing posters or of extending other protection.

Whenever borderline cases occur, the Consulate General proposes (if time and circumstances permit) to refer such cases to the Department with recommendations and then await the Department’s instructions. The question of eligibility for posters affords an excellent opportunity of determining appropriate action in specific cases, thereby developing a pattern for deciding other cases, involving consular protective action, which may well arise when time is more pressing.

I should be most appreciative of any general advice and comments that the Department may care to make with reference to this general subject.

Respectfully yours,

John M. Cabot

56. None printed.