Foreign Relations of the United States: Diplomatic Papers, 1944, China, Volume VI

893.51/3–2044

Memorandum of Conversation, by the Chief of the Division of Chinese Affairs (Vincent)^79a

[Washington,] March 20, 1944.

Participants:	The Secretary of the Treasury,
	Mr. Bell, Under Secretary of the Treasury,
	Mr. Harry White, Assistant to the Secretary of the Treasury,
	Generals Somervell, Clay and Carter;
	Mr. Vincent, CA.

At the request of Secretary Morgenthau I attended a meeting in his office this afternoon at 3:15. The above-mentioned officers and officials were also present.

Secretary Morgenthau read a letter from Madame Chiang Kai-shek to the President which the President had referred to him for suggestions as to a reply. The letter was dated February 17.^79b

Madame Chiang discussed for a matter of two pages her recent trip with Generalissimo Chiang to the Hunan front, where, she said, they were endangered by Japanese bombing almost daily. She and the Generalissimo had made a point of visiting American Army personnel in the area and had found morale in general to be good. She said, however, that some were becoming weary from a prolonged tour of duty in China and sceptical of the necessity of their being in the country. She remarked on the inadequate support being given General Chennault^79c in the form of fighter planes and referred to one American airfield which had been abandoned (Lingling) and to others, among them Hengyang, which were being subjected to severe bombing. There was much more comment of a similar tenor which Secretary Morgenthau stated that he was reading solely for General Somervell’s information.

In the latter half of the letter Madame Chiang took up the question of financing the newly expanded American airfield program in China. She said that the Generalissimo and Dr. Kung were both very much concerned, being fearful that Chinese economy could not withstand the impact of these additional expenditures. She suggested that the American Army might therefore be faced with the necessity of curtailing its program.

Madame Chiang referred to the proposed visit of Dr. Kung to the United States to discuss financial matters. She said that the Generalissimo and Dr. Kung both felt that, if there were no possibility that Dr. Kung could obtain the loan or credit which the Generalissimo had proposed, it would be impolitic for him to visit the United States because the disappointment of the Chinese people over his failure to accomplish this concrete objective would make matters more difficult in China. She suggested as an alternative the visit of an American financial mission.

In concluding her letter Madame Chiang stated that, having knowledge of the President’s great feeling of sympathy for China and of his desire to be helpful whenever and however possible, she was placing the situation before him.

Secretary Morgenthau stated that the immediate problem was what suggestions should be given the President with regard to his reply to Madame Chiang. General Somervell called attention to the fact that the letter was written February 17. He said that a number of things had happened since that time, encouraging to the Army, and indicative that the Chinese were not entirely averse to supporting the proposed program for an expansion of airfield facilities. He mentioned the $5,000,000,000 that had been advanced by Kung in March, the Chinese currency shipments by plane that were being made to China to enable Kung to advance the funds, the US$25,000,000 that had been deposited to China’s credit in New York, and the US$20,000,000 in currency which was now en route to China.

General Somervell suggested that Secretary Morgenthau go to China. The General said that he was very much in earnest. Secretary Morgenthau asked me what I thought of his going. I told him that the reasons which Madame Chiang had given as making it inadvisable for Dr. Kung to visit this country might make it inadvisable for the Secretary to proceed to China. Secretary Morgenthau agreed that there was little he could do by visiting China but indicated his willingness to go if General Somervell thought that his visit would be helpful. General Somervell said he thought that it would be helpful. The Secretary said he could not go before July.

Secretary Morgenthau pointed out that Madame Chiang, in writing to the President, might not in fact be representing entirely the views of the Generalissimo and Dr. Kung, or those of the Chinese Government. Such being the case, he said that it would probably be best to couch the reply in general terms.

General Somervell again referred to the fact that work was proceeding on the airfields. He said that the Generalissimo had approved all of the projects some time ago, adding, however, that he might not have known at that time the large amount of money that would be required to finance the projects. In response to Secretary Morgenthau’s query, General Somervell indicated that the Army considered it, from a strategical standpoint, very important that the airfields be completed. Secretary Morgenthau indicated that there was a similar feeling in the White House.

Secretary Morgenthau said that he had in mind suggesting to the President that he inform Madame Chiang that the serious situation which she described was receiving our earnest attention here but that he believed it to be a problem best handled by General Stilwell and the Generalissimo; that they should discuss the matter as two soldiers desirous of hastening the conclusion of the war. General Somervell suggested that the President indicate to Madame Chiang that he had in mind asking the Secretary of the Treasury to visit China next summer to discuss financial matters, and that in the meantime we should carry on the airfield construction program. In response to his question, I told Secretary Morgenthau that, without going into the question again of the advisability of his going to China, I questioned the advisability of having the President indicate to Madame Chiang that the Secretary of the Treasury might make a visit to Chungking. In the first place the situation in China might alter radically in the next four months, making it ill-advised or unnecessary for the Secretary to make the trip, and in the second place Madame Chiang seemed to me to be hardly the appropriate channel through which to communicate the President’s intentions in this regard. Secretary Morgenthau and General Somervell agreed but General Somervell suggested that the President simply indicate to Madame Chiang that he had in mind sending out a financial mission which the Secretary of the Treasury might head. Secretary Morgenthau indicated that he did not wish to be mentioned as a possible head of the mission.

The discussion then centered around the question of the effect on Chinese economy of the enlarged Army expenditures. General Somervell indicated that the War Department appreciated the situation but that it did not consider that the situation held sufficiently grave possibilities to cause the Army to abandon or modify its program. There was some discussion of the character of the effects of the expanded program on Chinese economy. Mr. White requested a clear statement from General Somervell that the Army, in full knowledge of possible effects on Chinese economy of its program, was prepared to assume responsibility for carrying on with the program. General Somervell indicated some doubt, which Mr. White shared, that the effects would be as serious as Madame Chiang and Ambassador Gauss (in his recent telegrams) seemed to fear. The General, without replying directly to Mr. White’s request, said that he thought the Army should go ahead with its program.

I reminded Secretary Morgenthau and Mr. White that there was probably even now a telegram en route from Mr. Adler, the Treasury representative in Chungking, in which, in response to a Treasury request, he would give his opinion with regard to the statements in recent telegrams from Ambassador Gauss regarding the serious danger in which the Army’s program placed Chinese economy. Both Secretary Morgenthau and Mr. White indicated that, General Somervell having taken the position that he had, Mr. Adler’s comments would probably not alter their attitude.

I recalled Dr. Kung’s request that the Army endeavor, in addition to present air freight into China, to bring in 2,000 tons of consumer goods, and pointed out that, whereas I could not argue with General Clay’s statement that planes for that purpose were not available, I did wish to take exception to his statement in a recent telegram that previous shipments of the kind had not had any effect on Chinese economy. As a matter of fact there have not, I said, been previous shipments of the kind. General Somervell said that irrespective of whether or not such shipments of consumer goods would have any material effect in China, it was impossible to obtain the necessary air transport planes for that purpose.

I also raised the question of action by China which would tend to minimize the effect on Chinese economy of the Army’s program; specifically, action by the Chinese Government to furnish presently nonproductive labor for construction and to control the price of materials needed for construction. General Somervell said that the Army, he felt, had made every effort to obtain action by the Chinese Government along those lines. He turned to General Clay, however, and told him to conclude “every telegram” on the subject to Chungking with an instruction that the Chinese Government be pressed to take the desired action.

Secretary Morgenthau stated in conclusion that in essence what we were suggesting was that the Departments of State and Treasury leave the matter in the hands of the War Department and the Army on the ground that strategical considerations were paramount. He said that the Secretary of State would no doubt be consulted before a reply was sent to Madame Chiang, but he asked me to report the substance of our discussion in strict confidence to the Secretary. He said that, if the President replied to Madame Chiang in the sense that seemed to be indicated at our meeting, it would probably be necessary to inform Ambassador Gauss. I told him that we would of course keep Ambassador Gauss informed.^79d

The conference was concluded at 4 o’clock.

1. Submitted by Mr. Ballantine to the Secretary of State with a summary by Mr. Vincent of March 21.
2. Not found in Department files.
3. Maj. Gen. Claire L. Chennault, Commanding General, U. S. 14th Air Force in China.
4. The Treasury Department’s draft of a reply from President Roosevelt to Madame Chiang was transmitted on March 31 to the Department of State for approval. Approval was given by the Assistant Secretary of State (Acheson), and Mr. Vincent so notified the Treasury Department by telephone.