893.50/11–2244
Memorandum of Conversation, by the Adviser on Economic Affairs of the Embassy in China (Sumner)53
| Present: | Dr. Franklin Ho, Deputy Secretary-General, Central Planning Board. |
| Mr. Boehringer, Second Secretary of Embassy. | |
| Dr. Sumner, Advisor on Economic Affairs. |
We called on Dr. Ho by appointment this afternoon for the purpose of obtaining information relative to China’s plans for postwar economic development. During the conversation, Dr. Ho made the following observations:
1. The Central Planning Board is making certain revisions of plans and estimates submitted by the several ministries. By the end of 1944, however, the Board expects to have completed its work of review, and to have formulated an integrated master five-year plan for economic development. This plan will, of course, be subject to further study and revision as circumstances dictate.
2. Estimates of expenditure for each important line of activity have been prepared in considerable detail. In the industrial plan, for example, the investment to be devoted to the manufacture of chemicals is estimated separately for each important chemical product.
In an overall sense it is contemplated that the distribution of investment among major lines of activity will be approximately as follows:
| Industries, Mining and Public Utilities | 30 percent |
| Transportation and Communication | 25–30 percent |
| Agriculture | 20 percent |
| Public Health, Water Conservancy, Irrigation, etc. | 20 percent |
3. As reported in a separate despatch (no. 3172, November 22, 194454), Dr. Ho regards the proposals to UNRRA as applicable to a comparatively short period of demobilization, while the overall five-year plan for economic development would go into effect subsequently.
4. In order to achieve a desired balance in the development of different industries and lines of activity, the government may not only engage directly in especially important projects (see Embassy’s telegram no. 1864, November 19, 9 a.m.) but may discourage additional investment in a particular industry regarded as over extended relative to others. In this manner it is hoped that available funds may be diverted to other industries where further development is regarded as more necessary.
Similarly, the further development of an industry in a given region or locality may be discouraged to avoid an undue geographical concentration. (This point had also been mentioned by Dr. Wong Wen-hao, Minister of Economic Affairs, in a conversation with us the previous day. After referring to the substantial industrial development which is reported to have occurred in Manchuria, Dr. Wong remarked that China does not want all her development to be concentrated in one place.)
In evaluating the significance of the forthcoming official statement of the general principles governing postwar economic development and the role of private domestic and foreign enterprise therein (see Embassy’s telegram no. 1864, November 19, 10 [9] a.m.) it is suggested that the above features of the overall five-year plan be kept in mind. However desirable it may be to control the amount and location of private investment, such control affords a basis for a very significant degree of Government supervision of private business operations.
5. When asked what considerations were used in determining the amount of investment proposed for one industry or line of activity relative to others, Dr. Ho said that non-economic factors were important. He cited aircraft production as an example of an industry that had been included in the plan for military reasons. Such industries would be established on a minimum basis, even though their operation entails a financial loss that must be borne by the Government.
Agricultural development was stressed as a necessary source of industrial raw materials, such as cotton, and as a means of obtaining and conserving foreign exchange. Discussion along the above lines was quite incomplete.
6. Dr. Ho stated that consideration was being given to obtaining the services of one or more American economists to study the overall plan for postwar economic development. He thought this might be done next spring.…