Taipei, December 19, 1963.
DEAR ROGER: Having been on the job here for six months, I feel that I have my teeth reasonably dug into the situation. I am, therefore, compiling a brief summary of important aspects of recent developments which I think should be elaborated in a personal exchange with you.
Mainland Recovery Activities
With respect to the most delicate problem which has concerned us over the past two years—GRC preparations for military action against the mainland—we seem to be in a prolonged quiescent period. Statements to President Chiang, and to Chiang Ching-kuo during the latter's visit to the United States, reaffirming United States opposition to any overt military action by the GRC under present circumstances, combined with assurances of continued United States support for the GRC and acquiescence in small-scale clandestine operations plus study of other possibilities, appear to have served their purpose. Even though small-scale raids continued through October and November, accompanied by much high-flown publicity, there is little evidence that President Chiang contemplates cranking up the military machine for any early large-scale action.
The GRC sees little prospect of any significant economic recovery on the China mainland in the near future or any patching up of the Sino-Soviet dispute. These conclusions have tended to keep down the feeling of urgency here. However, there is a risk that this feeling may build up again over the next few months stimulated by the rush of European countries and Japan to do business with Communist China and by the downward trend of United States economic and military aid to the GRC. There is no sign yet that we are likely to run into a rising curve of secret military preparations here such as occurred in the spring of 1961 and to a lesser degree early in 1962, but we will keep our eyes open for indications.
In the political field we have devoted considerable time in the past few weeks to the question of relations between the Republic of China and Japan. The basic disquiet here arising from expanding Japanese trade with the Chinese mainland and the political implications of this expansion have been exacerbated by statements by Prime Minister Ikeda questioning the return-to-the-mainland policy and by the case of the ChiCom defector, Chou Hung-ching, still in Japan.
The GRC has been somewhat encouraged by the success of its protests in delaying Chou's repatriation, but continues to press for access to him. If the Japanese Government gives the GRC access to Chou, as it now seems inclined to do, and provides a further breathing spell before he is repatriated, reaction here may not be too serious. There is some evidence that the Chinese are endeavoring to prepare a situation in which the return of the defector to the mainland could be treated with measures short of either disruption of trade relations or impairment of diplomatic relations with Japan.
Recent press treatment of the subject has been moderate and it has been emphasized that Chou has been “brainwashed” by the ChiComs and is being forced to return to protect his family's safety. In these terms it could be demonstrated that he would not have made an unfettered decision not to come to Taiwan. The Japanese, of course, would continue to be castigated for permitting leftist influences access to him.
Recent government changes here in Taipei will not, we think, result in fundamental changes in the direction of GRC policies. C.K. Yen, the new Premier, can be expected to devote major energies to continuing economic development, financial stability and continuation of necessary United States aid arrangements, to the extent he is permitted to do so by the Gimo and the hard-line “return-to-mainland” supporters. There is general agreement he will not be a strong premier and his policies will be heavily dependent on presidential guidance and backing. The resignation of Chen Cheng as premier generally is interpreted as portending a long-term diminution of his influence in the GRC and this probably will, in fact, be the case. At the same time, the President's son, General Chiang Ching-kuo, is very likely to achieve greater influence. However, the full implications of the new government are not yet discernible.
Representation at Funeral
The GRC has been subject, as you know, to some criticism because of an allegedly inadequate response to President Kennedy's assassination. Our assessment is that the question was fumbled until the point had been reached where there was insufficient time to send someone, even after realization that a special delegation from the GRC would be conspicuous by its absence.
I see no important political significance in this matter and I think we should make every effort, as we have endeavored to do, to help mitigate Chinese embarrassment on this score. The Japanese seem inclined to “make something” out of this blunder, but Reischauer is on top of the situation.
Relations with President
I have taken advantage of the visits of various prominent Americans recently and their calls on the President to take him aside briefly for discussions and presentations of interest to us. I believe that I am achieving a useful relationship with him and, for my part, I believe that these brief exchanges have served constructive purposes.
Reduction in FY 64 Program and FY 65 Military Aid Plan
The FY 64 Program as revised at CINCPAC in November and forwarded to the Department of Defense reduced the MAAG China ceiling from $133.8 million to $94.8 million. The FY 65 ceiling was reduced from $163.0 million to $108.4 million. The reduction in ceilings and in investment funds available for force modernization will increase the shortfall which must be funded in later years. Modernization of F-86F and C-46 squadrons and purchase of destroyers, tanks and armored personnel carriers, in addition to any minor but essential items, will not be possible under this reduced funding.
The second battalion of Nike-Hercules missiles is still funded in FY 64. However, the President has authorized deletion of this item under provisions which will be difficult to accept. CINCPAC's action has gone to Defense. If the deletion is approved, the FY 64 program will be reduced accordingly since it is very doubtful we will recoup any of these funds. The prospect is for a gradual decline in the overall capabilities of GRC forces, as equipment will not be modernized or replaced as rapidly as it wears out.
One squadron of eight RF-104G aircraft and seven F-104G aircraft have arrived in Taiwan. All F/RF-104G's will be initially based at Kung Kuan. Upon receipt of additional facilities and equipment, the reconnaissance models will move to Taoyuan.
Progress is being made by the GRC in obtaining loans from international sources to replace the inflow of United States funds as the economic aid program is phased out. The World Bank made a loan to the GRC of almost $8 million repayable on commercial terms (5-1/2 percent interest, 15-year term). Burke Knapp, Vice President of the World Bank, told us and the Chinese on a visit here that the Bank was anxious to expand its lending program here.
Another favorable development has been the rapid increase in GRC exports to US$295 million in the first ten months of 1963 as compared with a preliminary Chinese estimate of US$270 million for the entire year. It appears that exports may well reach US$330-350 million for the year. This increase resulted largely from the fortuitous rise this year in the price of sugar, but other exports also increased by an impressive 22 percent. The government is concentrating increasing effort on the promotion of exports. [Here follows brief discussion of copyright problems, the preparation of a national policy paper (not completed until 1964), Wright's interest in encouraging visits to Taiwan by high-level U.S. officials, pending military exercises, Hilsman's Commonwealth Club speech, and personnel matters.]
Jerauld Wright11. Printed from a copy that bears this typed signature.
* Source: Department of State, FE/EA Files: Lot 66 D 224, R.C., ORG 1. Secret; Official-Informal. Wright sent a copy of the letter to Harriman. (Library of Congress Manuscript Division, Harriman Papers, Kennedy-Johnson Administrations, Subject Files, Box 524, Whf-Wz miscellaneous, 1961-1969)
1 Printed from a copy that bears this typed signature.