Memorandum by the Adviser on Far Eastern Investment and Finance, Division of Financial and Monetary Affairs (Remer)50

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:

The Important Documents.51
American Assistance to the Chinese in the Planning of Industrialization and Economic Development.
Mr. Nelson’s Proposed Committee.51
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.

C. F. Remer
[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

The Department should continue to support Mr. Nelson’s efforts to increase the production of war supplies in China.
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

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.
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.
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.
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.
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.
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?
[Annex 2]

American Assistance to the Chinese in the Planning of Industrialization and Economic Development

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.
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.
It follows that the United States has an interest in the economic plans of the Chinese and some responsibility in connection with these plans.
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.
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:
The work should be for the Chinese Government or for Chinese groups at the request of the Chinese Government.
No American plan should be drawn up for China independently of the Chinese Government or its authorized groups.
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.
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.
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.
  1. Addressed to the Director of the Office of Economic Affairs (Haley) and to the Chief of the Division of Financial and Monetary Affairs (Collado).
  2. Not printed.
  3. Not printed.
  4. Not printed.
  5. For correspondence regarding Chinese postwar economic development, see pp. 1040 ff.
  6. United Nations Relief and Rehabilitation Administration.