CAB129-45 — Page 417

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ANNEX

TREATMENT OF BRITISH INTERESTS IN CHINA BY CENTRAL PEOPLE'S

British Subjects in China

GOVERNMENT

The best guide to Chinese treatment of British interests in China is probably provided by the statistics of British subjects (nationals of the United Kingdom and old Commonwealth countries) particularly in Shanghai. Shortly before the Com- munist take-over in May 1949 there were 3,000 in Shanghai; now there are about 1,000. The total number of British subjects in China is now about 1,700; this compares with about 20,000 in 1937 and 5,000 in 1945.

British Stake in China

2. In 1937, the British stake in China was estimated at £200,000,000. The figure is now nominal, property often being a liability. British commercial interests can be divided into two categories:-

(a) the manufacturing and distributing interests;

(b) Import and Export firms and shipping interests.

Commercial Interests

(a) British manufacturing and distributing interests in China

3. Firms in this category include the British American Tobacco Company, with cigarette factories as well as agencies throughout China; the Kailan Mining Administration, the largest coal mining enterprise in China, formerly with 50 per cent. British ownership and management; the Asiatic Petroleum Company (Shell), with its installations and distributing agencies throughout the country dealing mainly in kerosene and gasoline (all the Company's property except its offices were requisitioned by the Chinese Government on 29th April "for the sake of China's security and in the public interest": it looks as if this were a measure of retaliation for our requisitioning of the Chinese oil tanker Yung Hao in Hong Kong); Imperial Chemical Industries, selling dyes and fertilisers; British godowns, wharves, warehouses, tugs and lighters in the Yangtse ports; soap factories; wool and egg packing factories, breweries, &c. A number of these are running at a loss and some are in process of liquidation (e.g., the British American Tobacco Company). This also applies to many of the smaller independent business units though a few are making small profits which, however, cannot be remitted to the United Kingdom. The main causes of this are-

(i) little or no business;

(ii) inability to dismiss labour or reduce labour charges (one reason for this

may be Chinese anxieties about resulting large-scale unemployment);

(iii) high taxation (though less severe than a year ago);

(iv) fixed prices (often below cost of production rates);

(v) lack of raw materials;

(vi) low purchasing power as a result of the Government's strict deflationary

policy; and

(vii) competition by more favourably placed Chinese companies as well as

Chinese Government monopolies.

4. There has been no specific discrimination since many Chinese enterprises have similar difficulties (although they can sometimes obtain government loans or assistance). The technique used by the Chinese has been a rigid enforcement of regulations which often ignore economic facts. Failure to comply would bring the manager of the foreign company in question up against the law. On the other hand attempts to comply have led some companies to insolvency. Closure of business and reduction of staff are often not permitted. Sale too is made difficult or impossible. Moreover until such time as " liquidation " difficulties have been over- come by the "responsible person of the enterprise in question, he is unable to obtain an exit permit. Difficulties experienced by individual British firms are sum- marised in the appendix to this memorandum.

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