893.50/10–1444

Memorandum of Conversation, by Mr. John D. Simmer of the Division of Chinese Affairs

After stating that Mr. Vincent and I regarded my work in Chungking49 as being on behalf of the United States Government, and not only for the State Department, I told Mr. Willauer50 that it would be most helpful to have a clear picture of FEA’s approach to the post-war problem.

Mr. Willauer then confirmed my impression that Mr. Alex Taub’s group in FEA is preparing analyses of the cost of development of various industries, which will be tied in with the work of Willauer’s office, in order to obtain a picture of what lines China’s economic development might take during the first two years or so after the war.

Mr. Willauer stated that these plans are being developed on the basis of certain assumptions or propositions: First, he stated, is FEA’s belief that China’s economic development should be built from the ground up; for example, in the case of textiles it may be desirable to prepare to make the tools necessary to build the equipment for textile manufacture. Thus he appeared to believe that proper integration calls for the development of the lower as well as the higher strata of industry.

Second, he emphasized their belief that China should be encouraged to begin its development by the construction of the smallest-sized producing units which are practicable. (This approach is being followed by Taub.) On the basis of such small-sized units China would later be able to make whatever expansions seem desirable under the circumstances.

Third, Mr. Willauer referred to his belief in the development of an economy which represents an “integrated” whole. I asked whether this meant that FEA was sympathetic to the desire in some Chinese quarters to develop a self-sufficient economy for military purposes. [Page 1080]Willauer replied that FEA believed that the Chinese economy should be essentially a non-military one and that the Chinese might be persuaded to rely on surplus military stocks of this country to meet her needs for the first five years or more after the war. Willauer also agreed that Taub’s plan might be substantially altered by the process of addition and subtraction in order to get an economically desirable distribution of emphasis.

Fourth, was the proposition that a sound industrial development would have a number of important political implications, or byproduct developments. He referred, for example, to the potential consequences of the previous reliance of the Chinese Government on taxes on land and agricultural output; industrial development would give additional sources of funds. Also, industrial development would produce a pressure for more extensive education and would provide employment for educated personnel. The process of government might also be expected to change and the degree of government through political “deals” diminish.

A fifth proposition was related to the problem of manpower. FEA is developing a training program which involves the problem of how to get the most rapid and effective methods of teaching various industrial and business skills. He has in mind the use of such skills in government as well as in Chinese business, citing the entire lack of adequate central statistical work in the government.

The agricultural problem Willauer regards as being susceptible only of gradual improvement. He referred to the difficulty of judging what effects on the Chinese diet and public health might follow from changes in, e. g., the type of fertilizer used.

Finally, Willauer referred to consideration of the means of payment by China for her industrial development. I gathered that not much had been done in FEA on this thus far. He believes that the Chinese should be encouraged to focus attention on the balance of payments and the possibilities of developing triangular trade. He expressed the opinion that the Japanese fear that China was beginning to outstrip her in certain industries was an important factor contributing to the Japanese decision to start the war in 1937.

  1. As Adviser on Economic Affairs (Foreign Service Auxiliary); Mr. Sumner arrived in Chungking on November 4, 1944.
  2. Whiting Willauer, Chief of the China Branch Areas of the Foreign Economic Administration.