893.50/12–2044
Memorandum by the Adviser on Far Eastern Investment and
Finance, Division of Financial and Monetary Affairs (Remer)50
[Washington,] December 20, 1944.
You will find attached a summary statement on the interest of the State
Department in Donald Nelson’s work in China and the following Supplements:
- 1.
- The Important Documents.51
- 2.
- American Assistance to the Chinese in the Planning of
Industrialization and Economic Development.
- 3.
- Mr. Nelson’s Proposed Committee.51
- 4.
- The Yangtze Gorge Project.51
This summary statement and its supporting documents have been prepared in the
hope that they may be of assistance in the unification of the work on
American economic relations with China. Special attention has been given to
long run economic development and related problems. This work will no doubt
grow in volume and importance during the coming months and over the next few
years. We should welcome Mr. Nelson’s participation and try to bring it into
proper relation with the economic work now going forward in the
Department.
[Page 296]
[Annex 1]
The Interest of the State Department in Donald
Nelson’s Work in China
The need for unification in the economic work of the Department is
generally recognized and this need extends beyond the Department to
every agency of the Government where economic policy toward China is
involved. Reliance upon the United States is fundamental in Chinese
economic plans, both for the present and for the future. It is but one
aspect of the growing responsibility of the United States in the Far
East.
The work of Mr. Donald Nelson in China, while it is concerned chiefly
with production for war, is concerned also with longer run economic
development. This work should be brought into effective relation with
that of the State Department in the same field. Certain suggestions
toward this end are offered below.
i. production of war supplies in china
- 1.
- The Department should continue to support Mr. Nelson’s efforts to
increase the production of war supplies in China.
- 2.
- The proposal that the head of an enlarged FEA group in China be
given the title of Minister should be questioned. It is believed
that this title, if it is to be used, should be given to the chief
of the economic staff of the Embassy.
ii. postwar industrialization and economic
development in china
- 1.
- Mr. Nelson has proposed the despatch to China of a seven man
committee to advise on postwar problems.52 The advisability of sending such a commission has
been questioned. This proposal should be fully examined and
alternative methods of aiding China should be considered.
- 2.
- If such a committee is to be sent to China its membership should
be expanded to include men in the following fields: international
economics, commercial policy, fiscal policy, law, agriculture in its
relation to industry. A specialist in currency is required unless
this problem is to be independently dealt with.
- 3.
- If such a committee is to be sent it should be looked upon in
China, in the United States and in other countries as a group
assisting the Chinese Government in the working out of Chinese
plans.
- 4.
- On general grounds and for the purpose of dealing with the
economic problems involved in Mr. Nelson’s proposals and in the
activities [Page 297] of UNRRA,53 the economic staff of the
Embassy should be expanded and the chief of that staff should be
given the highest practicable rank.
- 5.
- Any definite plans which Mr. Nelson may have, to carry forward in
Washington his interest in the long run economic problems of China,
should be discussed with him so that confusion will be avoided in
dealing with concrete projects and with interested American business
groups.
- 6.
- Mr. Nelson has taken an interest in the proposal for hydroelectric
development in the Yangtze Gorges. A development of this magnitude
must fit with other proposals and can hardly be judged by itself. It
will require a large long term loan ($800 million) from the United
States and probably from the Government. This raises questions of
policy which require examination. What priority should be attached
to this project in view of the many urgent needs of China, such as
that for the rehabilitation and development of
transportation?
[Washington,] December 21,
1944.
[Annex 2]
American Assistance to the Chinese in the Planning
of Industrialization and Economic Development
- 1.
- The United States will give assistance to China in economic
reconstruction and development at the end of the war. This is
expected by both Chinese and Americans. It was probably determined
by the attack on Pearl Harbor and is one of the consequences in the
field of economic and general foreign policy which flow from the war
in the Far East.
- 2.
- China will undertake to make plans for her development in advance.
China is strongly influenced by the example and the success of
Soviet Russia. The country is poor and should use every resource as
effectively as possible. One of her resources is foreign investment
in her country. The impulse toward planning will be reinforced by
the new legal situation following the abolition of
extraterritoriality and by the attitude of the Chinese toward
foreign investment in the past.
- 3.
- It follows that the United States has an interest in the economic
plans of the Chinese and some responsibility in connection with
these plans.
- 4.
- The first step in the expression of this interest is to acquire
knowledge as to the state and nature of the economic plans of the
Chinese. This is being done through the Embassy in Chungking and in
the Department in Washington. This knowledge should be acquired as
soon as possible and should be as complete as possible. The [Page 298] staff of the Embassy
should be expanded and plans should be made for further and related
work.
- 5.
- The time will come when a decision must be made as to how further
assistance and advice is to be given the Chinese in their economic
planning. Preparations should be made in accordance with the
following:
-
a.
- The work should be for the Chinese Government or for
Chinese groups at the request of the Chinese
Government.
-
b.
- No American plan should be drawn up for China
independently of the Chinese Government or its authorized
groups.
-
c.
- The work should be done without publicity and without
undue haste. In other words, the pressure of a large and
much advertised commission should be avoided if
possible.
-
d.
- The work should cover every relevant aspect of Chinese
economic and political life. There should, however, be
provision for a reasonable division of labor and for some
independence in dealing with special problems.
-
e.
- The Chinese Government should take the initiative in
establishing the means by which American advice and
assistance is to be obtained. This is not inconsistent with
informal conversations on the subject.
[Washington,] December 21,
1944.
