893.64A/7–1145: Telegram

The Acting Secretary of State to the Ambassador in China (Hurley)

1075. The Department has carefully considered the proposal that Savage’s final report on Yangtze Gorge Project be prepared by the Bureau of Reclamation as requested by Minister T. V. Soong in letter to the Ambassador dated January 15, 194520 and reported to the Department by Embtel 115 dated January 26, 1945 and Despatch 104 dated January 29, 1945.21

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The proposal to complete the Savage report cannot be dissociated from the question of economic feasibility of the entire project. Power produced could be effectively used only if it were accessible to extensive modern industrial facilities and if trained labor and managerial staff were available. Vast outlays involved could not yield a net revenue for many years and would endanger the financial stability of the Chinese Government by tying up its resources and credit in unproductive facilities. In these circumstances the report could scarcely be of any greater advantage to China at this time than the preliminary reports already prepared.
Chinese officials realize that China’s own resources would not be sufficient to provide the sums needed for construction of these developments and have indicated that they would expect financial assistance in construction, presumably from this Government. It is the considered opinion of this Department that there is no prospect whatever of obtaining from this Government for many years, if at all, financial assistance requisite for the construction of the project. This should not be construed as an implication that financial assistance for economic development may not be forthcoming for projects of more immediate usefulness in the Chinese economy.
China’s estimated imperative requirements from abroad in the next few years are so far in excess of her potentially available foreign exchange assets that the expenditure by China at this time of 500,000 or more US dollars for preparation of the report appears to be unwise since effective use of the report cannot be expected for years to come.
For these reasons the Department considers that it would not be in China’s best interests to undertake the expenditure involved in completion of the Savage report or any further work in planning the project at this time. Nevertheless, the Department considers that the Chinese Government should itself determine the wisdom of now undertaking this expenditure.
You are therefore requested together with Walter Robertson, who is familiar with this question, to explain these views of the Department clearly and fully to Chiang Kai-shek and T. V. Soong pointing out to them especially that there is no probability that this Government would be prepared for many years to give financial assistance in the construction of this project and that expenditure on the report at this time appears unwise to this Department. On this basis you are to ascertain definitely and report whether in the circumstances they nevertheless desire to undertake at this time the expense involved in completion of the Savage report.
  1. Not printed.
  2. Despatch not printed.