811.244/364
The Ambassador in China (Gauss) to the Secretary of State
[Received January 24, 1944.]
Sir: Referring to the Embassy’s despatch No. 1936 of December 20, 1943,25 in regard to United States Army contracts with the Chinese Industrial Cooperatives, I have the honor to enclose26 (a) copy of a report dated December 22, 1943, together with its enclosures, prepared by Mr. F. M. Fisher, Chief of the China Division of OWI, and (b) copy of excerpts from a draft news despatch on the subject of United [Page 190] States Army purchases of supplies in China, written December 14 by Mr. Preston Grover, chief Associated Press correspondent for China and India, which was “killed” by the U. S. Army censorship authorities in Chungking.
Summary. Mr. Fisher describes the wave of profiteering which has accompanied every effort of the United States Army authorities in the China theater to acquire materials, buildings or sites locally. Merchants, banks and even persons with semi-official status have made a practice of cornering materials, et cetera, needed by the United States Army and have asked extortionate prices for the sale thereof. The inevitable result has been the widespread knowledge of such acts throughout the American armed forces and their consequent dislike of China. The head of the Kweilin office of OWI recently held a press conference to which were invited representatives of the Chinese newspapers at Kweilin and during which an SOS [OSS?] officer explained the relation between the high prices the Army was having to pay and the desire of the United States Army authorities to bring into China gasoline, bombs and similar materials rather than ordinary supplies for every day use of the American troops. This conference was described to the Chinese correspondents as being off the record and merely for background material. Following the conference, editorials attacking Chinese profiteering at the expense of China’s American ally appeared in three of the leading Kweilin papers and the local Chamber of Commerce is reported to have agreed to make purchases on behalf of the American forces.
Explaining that his despatch is based on interviews and observations in Chungking, Kunming and Kweilin, Mr. Grover states that rampant war profiteering by the Chinese on supplies and services for American forces in China is one of the most vexing problems for Americans here. He describes some of the prices charged by Chinese contractors and adds that complaints to the Chinese Government have so far been fruitless. Mr. Grover’s article also contained a description of the general situation in China which is being made the subject of a separate despatch to the Department.27
Respectfully yours,