893.51/12–2344
The Secretary of the Treasury (Morgenthau) to
the Secretary of State
Washington, December 23,
1944.
My Dear Mr. Secretary: I know that you will be
pleased to learn that we have successfully terminated the rather difficult
and arduous negotiations with Dr. Kung with respect to U. S. Army yuan
obligations in China. In this connection I would like to tell you that Mr.
John Carter Vincent was most helpful to me.
In our settlement with Dr. Kung we agreed to the payment of $210 million in
settlement of all U. S. Army obligations incurred up to September 30, 1944.
We also agreed to have quarterly adjustments and settlements with regard to
yuan obligations of the U. S. Army incurred after September 30, 1944. I am
now taking the necessary steps to obtain the information needed for the
renewal of the negotiations in the near future for settlement of obligations
incurred during the next quarter of 1944.
I am forwarding for your files copies of exchange of letters between Dr. Kung
and myself covering this agreement.
Sincerely yours,
[Enclosure 1]
The Secretary of the Treasury (Morgenthau) to the Chinese Minister of Finance (Kung)
Washington, November 25,
1944.
Dear Dr. Kung: I am informing the War
Department that we have successfully terminated the negotiations with
respect to U. S. Army yuan obligations in China. The terms of the
settlement of these negotiations as agreed upon at our conference this
morning are as follows:
- 1.
- The War Department shall transfer to the account of the
National Government of China or the account of such agency of
the National Government of China as the National Government of
China designates a sum of One Hundred and Eighty-five million U.
S. dollars (US$185 million), in addition to the Twenty-five
million U. S. dollars (US$25 million) already transferred,
making a total of Two Hundred and Ten million U. S. dollars
(US$210 million), in settlement of all U. S. Army obligations
incurred up to September 30, 1944.
- 2.
- This settlement does not include the yuan expended by the
Government of the Republic of China for board and lodging of
American armed forces in China. This sum will be credited to the
National Government of China as reciprocal aid under Article VI
of the Mutual
[Page 949]
Aid
Agreement of June 2, 194223 at the request of the National
Government of China.
- 3.
- As stated in paragraph 1 above, this settlement liquidates all
our obligations for U. S. Army expenditures in China up to
September 30, 1944 (with the exception of paragraph 2 above)
with the understanding that as appended minutes of conversations
at Bretton Woods on July 16, 1944 and in Washington on November
25, 1944 indicate this settlement is without prejudice to the
Chinese contention that the cost of the Chengtu airfields is not
included in the amounts referred to in paragraph 1 but should be
treated as an item of reciprocal aid under Article VI of the
Mutual Aid Agreement of June 2, 1942.
I wish to take this opportunity to say how much I appreciate the
cooperative attitude you have invariably displayed in your dealings with
the XL S. Treasury and the contribution you have thereby made to the
further cementing of the friendly relations between our two
countries.
Sincerely yours,
[Subenclosure 1]
Excerpt From Minute of Conversation at Bretton
Woods on July 16, 194423a
“General Clay: Well, Doctor, going back to what
we have been discussing, and this view which you have just stated, if we
paid you a gross of one hundred and twenty-five million now—a lump sum
of a hundred million with twenty-five million having been paid—that
would leave remaining the food and lodging and the four billion dollars
would be presented by you as a claim under Reverse Lend-Lease. It would
have no effect on the twenty million dollars for the next three months,
which would be paid in cash, and for which you would provide us with the
yuan that we need and would not prejudice that arrangement in any way;
that we would pay you the lump sum of a hundred million dollars
immediately, and in any Reverse Lend-Lease agreement to be effected, you
could, in addition to the food and lodging which you would put forward
as a claim, include also this four billion dollars.
“Dr. Kung: I wish I could do it, you know.
“H. M. Jr.: Excuse me. May I add one thing that
we talked about, that in admitting this Chengtu four billion dollars,
the claim, we in no way prejudice or go back on the cable of the
President,24 which we interpret was all
inclusive. I would like to make that clear.
[Page 950]
I mean, we claim that this telegram of the President’s meant twenty-five
million a month, and included the construction of everything.
Now, what we are saying in view of what you have said—but not in any way
going back on that—we still hold to this cable. But if you wish to put
that claim under Reverse Lend-Lease for four billion dollars, we would
raise no objection. Do you mind my making that suggestion?
“General Clay: That is right, sir. And we would
do it in the interest of harmonious relations and appreciation of the
cooperation which you have given to us.”
[Subenclosure 2]
Excerpt From Minute of Conversation in Secretary
Morgenthau’s Office, Treasury Department, November 25,
194424a
Secretary Morgenthau: Now let me see if I
understand it correctly. You will accept how many U. S. dollars for how
many months in payment, so we get that clear?
Dr. Kung: To the end of September, October
first, 185 million.
Secretary Morgenthau: That you will take $185
million until October first. And that is in full payment with the
understanding with respect to the claim. Is that right?
Dr. Kung: Yes.
Mr. Chi: In addition to that the claim for the
Chengtu air fields can be put in.
Mr. White: I want to make certain, Mr.
Secretary, that you and Dr. Kung are in agreement. I presume that you
are both using the word claim in the sense which we use it in the United
States, namely, that the Chinese Government could advance the cost of
the Chengtu air fields as a claim in mutual aid on the basis that such
cost had not been included in the figures submitted to us by the Army.
Whether that claim will be recognized or not is a matter to be
determined by subsequent examination of the data. In other words, the
word “claim” does not mean a charge but rather the right to claim that a
charge should be made for credit to reciprocal aid.
Secretary Morgenthau: To go a step further so
that there can be no misunderstanding—when we pay over this $185 million
we will state that that is in full payment for all obligations incurred
by the United States Army from the first of March to the first of
October.
Mr. Pei: I beg your pardon, Mr. Secretary,
with the understanding that the Chinese Government will put in a
claim.
Secretary Morgenthau: May put in a claim …25 That if subsequently additional
information comes to light, furnished either by our
[Page 951]
Army or the Chinese Government, the
Chinese Government may submit a claim for reciprocal aid.
[Enclosure 2]
The Chinese Minister of Finance (Kung) to the Secretary of the Treasury (Morgenthau)
[Washington,] November 25, 1944.
Dear Mr. Secretary: I am in receipt of your
letter of November 25, 1944 in which you stated that you were informing
the War Department of the successful termination of the negotiations
with respect to U. S. Army Yuan obligations in China on these terms:
- “1. The War Department shall transfer to the account of
the National Government of China or the account of such
agency of the National Government of China as the National
Government of China designates a sum of One Hundred and
Eighty-five million U.S. dollars (U.S. $185 million), in
addition to the Twenty-five million U. S. dollars (U.S. $25
million) already transferred, making a total of Two Hundred
and Ten Million U. S. dollars (U.S. $210 million), in
settlement of all U. S. Army obligations incurred up to
September 30, 1944.
- “2. This settlement does not include the yuan expended by
the Government of the Republic of China for board and
lodging of American armed forces in China. This sum will be
credited to the National Government of China as reciprocal
aid under Article VI of the Mutual Aid Agreement of June 2,
1942 at the request of the National Government of
China.
- “3. As stated in paragraph 1 above, this settlement
liquidates all our obligations for U. S. Army expenditures
in China up to September 30, 1944 (with the exception of
paragraph 2 above), with the understanding that as the
appended minutes of conversations at Bretton Woods on July
16, 1944 and in Washington on November 25, 1944 indicate
this settlement is without prejudice to the Chinese
contention that the cost of the Chengtu airfields is not
included in the amounts referred to in paragraph 1 but
should be treated as an item of reciprocal aid under Article
VI of the Mutual Aid Agreement of June 2, 1942.”
On behalf of the National Government of China I wish to confirm this
settlement as set forth in paragraphs 1, 2 and 3 and also to take note
of the appended minutes of conversation.
In making this settlement I wish to state that my Government agrees to
the above terms in the interest of Chinese-American cooperation and in
order to clear the way for closer collaboration in strengthening the war
effort against our common enemy. Furthermore, I wish to express my deep
appreciation for the unending sympathy and painstaking effort which you
have taken throughout the negotiation.
Yours sincerely,
