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Memorandum by the Adviser on International Economic Affairs (Feis)52
After reviewing various despatches recently received from the Embassy at Chungking regarding Chinese general economic conditions, and the interchange with London as regards the prospective economic mission, I should like to pass on to you my impression (which is roughly in accord with the conclusion set forth in the last cable from the Ambassador on the subject) that all steps and measures that might be taken either by the Fox mission now there, or through the Stabilization Fund, or through the economic mission in contemplation, would have comparatively little immediate usefulness in dealing with China’s serious and immediate problem. That problem from the point of view of China’s ability to continue effective military operation is a problem (a) of adequate supplies and essentials, and (b) adequate system of distribution. To deal with it I believe the arrangements would have to consist of (a) means of supplementing from outside sources China’s supplies of essentials, particularly rice, textiles, and possibly ordinary small iron and steel products, (b) The constitution by the Chinese Government, quite possibly in collaboration with the British-American mission, of a system of distribution better than that now existing. I would visualize in that connection a very large operative mission.
I suggest that if it is deemed feasible the discussions with Sir Otto Niemeyer be carried on along these lines.
The system of distribution might be combined with a program of price control with some chance of success; for I do not believe that the present Chinese Government is in a position otherwise to develop a successful system of price control.
Additionally, of course, every effort should be made compatible with the military effort of China, to increase revenues and decrease Government expenditure. There seem to be some possibilities in both directions, though only limited possibilities.
- Noted by the Chief of the Division of Far Eastern Affairs (Hamilton), the Adviser on Political Relations (Hornbeck), the Assistant Secretary of State (Acheson), and the Under Secretary of State (Welles).↩