811.5034 (China)/472
The Secretary of State to the Chargé in China (Peck)
Sir: Reference is made to the Embassy’s despatch no. 1874, January 12, 1939,26 in regard to the application of the Tientsin Investment Corporation, Incorporated, for registration as an American firm.
An examination of the material submitted with your despatch indicates that the place of business of the applicant is at Tientsin, China, and that it maintains an office in the United States merely for the purpose of complying with the laws of Nevada under which the Corporation was created. The applicant is engaged in the business of banking at Tientsin without any governmental supervision of or check upon its activities. There is no American governmental machinery in existence for such supervision.
Events have shown the need for governmental supervision of the activities of banks. No enterprise would be permitted to engage in the business of banking in the United States without such supervision and the Department believes that the development of American banking abroad, without governmental supervision, under the framework of American extraterritoriality should note that paragraph 7 (c) of Section 4 of the China Trade Act, 1922, provides inter alia:
“A China Trade Act corporation shall not engage in the business of discounting bills, notes, or other evidences of debt, of receiving deposits, of buying and selling bills of exchange, or of issuing bills, notes, or other evidences of debt, for circulation as money; nor engage in any other form of banking business; …”27
The examples afforded by the Oriental Banking Corporation and the Thrift Investment Finance and Trust Corporation also point to [Page 303] the soundness of the view that unregulated banking enterprise in the Far East should not be encouraged.
American banks operating in the United States with branches abroad are subject to supervision at home and their branches in China are thus in a category different from that of banks which operate solely abroad.
Under the circumstances outlined above, and without going into the question of the amount of American interest in the Tientsin Investment Corporation or into the question of the soundness or nationality of its management, the Department is of the opinion that the application of the Tientsin Investment Corporation for consular registration should be disapproved.
Please send copies of this instruction to the various consular offices in China for their information and guidance in similar cases.
Very truly yours,