Memorandum by Mr. William R. Lang don of the Division of Far Eastern Affairs

Position of China National Aviation Corporation in Chinese Internal Air Transport

Of all the efforts to develop aviation in China, American enterprise has been the most successful. The pioneer and sole representative of this enterprise has been the Pan American Airways System, since 1930 operating in China as the China National Aviation Corporation, an organization in which the Chinese Ministry of Communications owns 55% of the stock and Panair 45%. By its policies, its superb management and operations, its tact and its devoted service in the face of danger, war and loss of air routes, CNAC has made an outstanding contribution to the Chinese war effort and to Sino-American relations. Moreover, the direct service which CNAC had rendered to the United States military operations and to United States commercial interests in China has been of extraordinary value.

As a result of the mobilization for war purposes of the American aviation industry, CNAC has been unable in the past few years to keep up its fleet and at present has only two DC–3 and one Lend-Lease C–47 transports with which to operate its services from Kunming to Calcutta and within unoccupied China. CNAC, in addition, has some 30 Lend-Lease transports assigned to it by the United States Army, but under the terms of its contract with the Army these transports may only be used for freight operations between Assam, India, and the Kunming area (“over the hump”), so that this service does not facilitate CNAC’s transport operations within unoccupied China.

Commercial aviation in unoccupied China is represented at present by CNAC and the Central Aviation Transport Company (the successor of the German Eurasia Company), owned 100% by the [Page 679] Chinese Government.* CATC’s fleet consists of one 10–year-old Junker 52, and this machine plus the three aforesaid CNAC planes now make up China’s entire commercial air fleet for internal communications and for communications with the outside (India).

The CNAC-Army contract, mentioned above, signed on February 17, 1943, provided that all Lend-Lease air transports belonging to the Chinese Government and then allocated to or being operated by the carrier (CNAC) as well as “all Lend-Lease transports which may in the future be allocated by the United States to the Government of China” would be operated by the carrier for “over the hump” transport. Because of this limitation on the use of Lend-Lease planes for China, the Chinese Government in February 1943 made a separate request that five transports be allocated to it for maintaining official communications within China and to supplement the existing CNAC service from Chungking to Calcutta. In pursuance of this request five planes were recently delivered to the Aeronautical Commission of the Chinese Government, but, as these machines, according to present information, will be used by the Aeronautical Commission or by CATC, this allocation will not contribute in any way toward promoting or even maintaining an American interest in internal transport in China.

CNAC has sought to have released to it for use within China a minimum of five transports from among those Lend-Lease transports assigned to it for “over the hump” service. On January 23, 1943, the Department, in a letter to the War Department, expressed its support of the recommendation of the American Ambassador at Chungking that five such transports be released to CNAC. The Department has received information to the effect that, because of the anticipated demand for fuel and repair parts on the limited air space available for transport into China which this would entail, the United States Army authorities in the theaters involved have been consistently opposed to any expansion of civilian air services within China.

From the immediate and strictly strategic point of view, the position taken by the Army authorities in India and China with respect to the expansion at present of commercial air facilities within China has undeniable force. However, there are important reasons for taking a long-range view of the situation and finding a means of improving the interior air communications of China through, as far as [Page 680] possible, the medium of CNAC, which by reason of its technical experience, facilities, and organization is best equipped to effect such improvement. Among such reasons are the following:

(1) The American interests in CNAC have pioneered in the China field and have established an excellent reputation with the Chinese for cooperativeness in administration and effectiveness in operations. They have rendered invaluable services to the Chinese Government, Chinese persons of importance, and foreigners in China. The position which they have established constitutes a political and an economic asset valuable to the United States. It is desirable that this asset be conserved. Toward conserving it, there is need that CNAC be offered the means of maintaining and strengthening itself. If this means is not provided there is danger that this splendid organization will fade out of the picture in China. Were it to fade out, there might fade out with it the favorable position for American aviation in China. It is desirable, for the post-war interest of the American aviation industry as a whole, that that position not be lost. The Chinese are not overlooking and will not fail to note the attitude of the American Government toward an American interest which has performed as has the American management in this (CNAC) enterprise.

(2) Service renderable by civil aviation in China is important in its bearing on the problem of keeping up the Chinese war effort. Most of the small number of planes other than military which are operating within China now are employed in transportation of military personnel (Chinese) and for other purposes decided upon by that personnel. Such, it is understood, will be primarily the employment of the five planes recently delivered to the Aeronautical Commission of the Chinese Government. But there is need to facilitate transportation of civilian personnel, including some official civilian personnel, not only Chinese but also American and other, commercial and industrial personnel engaged in activities non-military but of importance in connection with the war effort. There is special need for quick transportation between Chungking and Kunming, between Kunming and Kweichow, and between Chungking and Chengtu and points northwest of Chengtu.

As a result of the progressively weakening economic condition of free China, arising from the isolation of the area, and of the breakdown of transport within the area to move essential local cargoes to vital points, there is developing in China a condition bordering upon a truce with enemy-occupied areas and with the Japanese forces on the front lines. The United Nations have been casting about to find means of arresting this trend and raising the will to fight among the Chinese forces, and under present conditions it would appear that a few more air transports offer one means.

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Although, it is understood, the Chinese Government is not under obligation to assign to CNAC any of the planes which may be allocated to China under Lend-Lease, there is ample reason for assuming that an arrangement can be made whereunder, if the United States Army would exempt from the restrictions contained in its contract with CNAC five transport planes, the five planes thus exempted would be put at the disposal of CNAC for employment in the operations within China of CNAC.

(3) For over ten years, in the face of the severest sort of trials, CNAC has persevered in its efforts to carry on a program which has been not only of great service to China but has also contributed to the promotion of American interests. At the present moment the Chinese are showing a tendency to do away with any enterprise in their country which in their opinion smacks of foreign “influence.” Disappearance of CNAC as a result of the operation of this tendency and of lack of material American governmental support would create a vacuum in China’s internal commercial air communications. It is conceivable that in those circumstances some European interest might eagerly rush in and be accepted by the Chinese, with a consequent loss to our aviation interests of their ground-floor advantage in China. Moreover, we are going to need every possible “trading” instrumentality for purposes of holding our own in our dealings with China within and during the next few years. For political, diplomatic, and commercial reasons it thus seems to the Department that it is essential that American interests such as those represented by CNAC be given strong United States support within legitimate and appropriate limits.

Accordingly, the Department strongly recommends that favorable action be taken on the standing request of CNAC for five additional transport planes.

  1. Technically the Sino-Soviet Aviation Company, owned fifty-fifty by the Chinese and Soviet Governments, with its fleet of two DC–3’s, belongs to the category of commercial aviation in China. In fact, however, this company’s transports only shuttle back and forth between Alma-Ata and Hami, in Russian and Chinese Turkestan, respectively, and are not of much service to China proper. [Footnote in the original.]