811.5034 (China)/475
The Secretary of State to the Consul General at Shanghai (Gauss)
Sir: The Department refers to your telegram No. 1321 of October 11, 6 p.m., and to its telegraphic instruction No. 583 of October 15, [Page 297] 3 p.m.,16 in regard to the application for registration of American-incorporated companies engaged, directly or indirectly, in the publication of newspapers in the Chinese language. In that connection, Dr. John C. Ferguson has requested that reconsideration be given to the application for consular registration submitted by the Pacific Publishing Company, an organization engaged solely in leasing the plant and property of, and publishing the Sin Wan Pao, a Chinese-owned newspaper published in the Chinese language. There is enclosed a copy of a memorandum of conversation under date February 14, 1939, between Dr. Ferguson and officers of the Department, and there is also enclosed a copy of a memorandum prepared by Dr. Ferguson16 in regard to that conversation.
It will be noted that Dr. Ferguson states that, when in 1929 he sold his majority interest in the Sin Wan Pao, he retained a small block of shares in the enterprise and was appointed adviser to the new Chinese company, and that therefore his relationship with the Sin Wan Pao has been unbroken. He feels that it is inequitable that he should be placed in the same category as men who have had no previous connection with Chinese newspapers and who presumably have lent their names solely for the purpose of obtaining American protection. Dr. Ferguson has in mind applications for American consular registration of other firms engaged in publishing other Chinese language newspapers at Shanghai.
Pursuant to Dr. Ferguson’s request the Department has given the matter of registration of the Pacific Publishing Company, together with the implications and possible consequences thereof, renewed consideration. The result of this consideration has been to confirm the Department in the opinion, which is in substantial agreement with your views, that applications for registration of American firms engaged in the publication of Chinese language newspapers should be refused. (See telegrams under reference.)
In the case under discussion, there has not been raised any question as to the bona fide character of Dr. Ferguson’s financial interest in the Pacific Publishing Company. Specifically the question at issue is the advisability of registering an American-incorporated publishing company whose sole activity is the publication of a Chinese-owned newspaper published in the Chinese language. Request for protection has not been made but developments might at any time raise the question of protection. In this connection it is pertinent to note that the American-incorporated company has an option to purchase the Chinese newspaper and it is possible that the American company might later consider it desirable to exercise its option.
[Page 298]It is doubtful that, irrespective of its desires or intentions, a Chinese language newspaper published at Shanghai could avoid being drawn into controversial discussions and situations of a political character. Although it is appreciated that the extension of diplomatic protection by the American Government does not, ipso facto, follow from the approval of consular registration of American firms, it is manifestly difficult to avoid there arising from the fact and circumstances of registration a presumption that protection will be extended. Furthermore, consular registration has from the standpoint of the general public the effect of giving the firm registered a status by virtue of which it receives special consideration based on an assumption that it is under American protection. A due regard for the responsibilities that American authorities in China have for the protection of wide and varied American interests at Shanghai as well as in China generally indicates the advisability, especially in view of our extraterritorial position in China and of the difficult problems to which the present conflict in China has given rise, of avoiding insofar as appropriate the assumption of responsibilities which previously inhered to the Chinese Government and from the assumption of which embarrassing complications might ensue to the injury of American interests in general. The Department feels that the publication of Chinese language newspapers is not, especially with conditions as they are now in China, a field which American individuals and concerns should be encouraged to enter directly or indirectly and that the American authorities should not take steps, such as granting consular registration, which would encourage entrance into such fields.
The Department realizes that the case of the Pacific Publishing Company in some of its aspects differs from the other cases cited in your telegram No. 1321 but it feels that all the cases involved the same general principle. Furthermore, the case of the China Press, an English language newspaper at Shanghai which applied for incorporation under the provisions of the China Trade Act,17 is a case which, although not on all fours with the case of the Pacific Publishing Company, nevertheless involves somewhat analogous considerations. In that case, it will be recalled, the Department of Commerce refused the application for incorporation under the China Trade Act. (Reference your 1211, December 22, 1937, 3 p.m., and the Department’s 62, January 20, 1938, 7 p.m.18).
The Department is not unmindful of the fact that, as reported in your telegram No. 1081 of August 10, 10 a.m.,19 the Associated American Industries, which has financial and operating agreements with [Page 299] certain Chinese industrial concerns, is registered at the Consulate General. However, in the opinion of the Department an essential difference between the case of the Associated American Industries and the case of the Pacific Publishing Company lies in the different characters of the enterprises with which these companies are connected.
It is realized that no hard and fast criterion can be formulated which would serve in all cases as an absolute guide for reaching decisions in the matter of consular registration; that individual cases will have to be judged in the light of the attendant facts and circumstances; and that the present conflict in China brings up considerations which call for the exercise of great care and at times for a stricter attitude on the part of the Department than might be required during normal times and situations.
While the Department, as indicated hereinbefore, is not inclined to make an exception in the case of the Pacific Publishing Company to its previous decision that the registration of American-incorporated companies engaged primarily in the publishing, directly or indirectly, of Chinese language newspapers is inadvisable, it will welcome your comment in regard to the matter in the light of the information contained in the enclosed memoranda and of the foregoing discussion of the case. Please also state whether or not the Department’s understanding that no Chinese language newspapers are registered at the American Consulate General at Shanghai is correct.20 The Department has noted in subheading (e) of section 2 of your telegram No. 1321 that the American-registered Shanghai Evening Post and Mercury publishes a Chinese edition but that this publication is not included in the registration of the company.
Very truly yours,