The Acting Secretary of State to the Ambassador in China (Gauss)
762. Department has given additional consideration to your 820, May 10, 2 p.m.,21 and on the basis of exchanges of views with various governmental agencies in Washington offers the following by way of supplementing the Department’s no. 646, May 13, 7 p.m.22
The general feeling among officials of the War Production Board is that the present is not an opportune time to encourage the development of projects which have no immediate relationship to the war effort and which if developed would only result in setting up a claim for materials some of which are still in short supply. This attitude on the part of the War Production Board is largely a reflection of the thinking in the armed services which is still one of concern with regard to maintaining the flow of materials essential to the successful prosecution of the war, and in part is related to a realistic appraisal of the general China situation, particularly the transportation bottleneck. The attitude in the Department of Commerce and in Foreign Economic Administration circles is that where planning for the development of long range or postwar projects peculiarly essential to China’s needs can be prosecuted without endangering the war effort, or without encouraging demands for materials which are in [Page 1052]short supply, there would seem to be no good reason why such plans or objectives should not be approved or endorsed. The Department concurs in these views.
Although Mr. Lund’s memorandum, “Outline of Proposals for Development of China’s Coal, Iron and Chemical Industries”,23 on file in the Department suggests that his present plans may not conflict with these views, the Department can reach no conclusion until further information is supplied. The doubts expressed in the Department’s 646 should be borne in mind, but they should not prevent the examination without prejudice of the current proposal if it is again brought to the Embassy’s attention by Mr. Lund. This examination should include the nature and extent of American interest. In view of the fact that pressure for the initiation of this and other projects may become strong when the transportation bottleneck is relieved, the Department is interested in having on hand full data so as to be in a position to judge the merits of individual proposals.