893.00/11–2745: Telegram

Ambassador Edwin W. Pauley, Personal Representative of President Truman in the Reparations Committee, to the Secretary of State 88

159. Reference CA 55278. I have just come from Tsingtao, Tientsin, Peiping and Chungking in China, in company with Undersecretary of the Navy Gates, and would like to report a few observations. China sources positively state the Soviet Government is turning over all of the territories and local management to the Chinese Communist forces, that they are also turning over concurrently all Japanese arms and ammunition to the Communist forces. In Peiping I interviewed Mr. Remmer, Consul at Mukden for the French Government. He states unequivocally that the Russians are moving industrial equipment from this territory indiscriminately, whether it be Japanese or otherwise.

Have been attempting to enter Manchuria myself with member of my Mission, but at present can find no way of accomplishing this. In Chungking I talked to the Generalissimo and Madame Chiang Kai-shek, as well as T. V. Soong and others interested in reparations. They all state that they see no possibility of solving the Manchurian occupation problem insofar as the Central Government of China is concerned. In fact, they state that if the Marines pull out of the area they now occupy in North China prior to the arrival of the Central Government troops, the Communists will take over. They further state that it is impossible for the Chinese troops to enter the Tientsin-Peiping area until at least 10 boats of appropriate size are given them to transport the troops to North China to replace the Marines. The Manchuria situation is quite disturbing to me: first, from the standpoint of its relationship regarding the Communists versus the Central Government; second, the Communists forces will be greatly entrenched by controlling Manchuria with all of its vast natural resources; third, the acquisition of Japanese arms; fourth, raw materials and semi-finished [Page 1045] products from Manchuria have a direct relationship to reparations and removals of industrial equipment from Japan.

During pre-war and war periods an increasing percentage of Manchuria’s exports went to Japan, and certain branches of Japan’s industry were overdeveloped by consumption of these exports. In value the percentage of Manchuria’s total exports going to Japan was 49.8% in 1937, 57.5% in 1938, and 62.4% in 1939.

Leading exports to Japan included iron ore, pig iron, anthracite coal, some rolled steel. Excess Japanese heavy industry, such as blast and steel-making furnaces, rolling mills, fabrication equipment, machine tools and small amounts of smelting and refining equipment for copper, zinc and lead, heretofore dependent on Manchurian resources, will be available for immediate removal from Japan.

The normal place for many of these interim removals of industrial equipment to go would be to the Philippines and China, but these countries will be greatly handicapped in deciding to receive them because of the lack of supply of raw materials which have heretofore fitted into the operation of these exact plants by imports from Manchuria.

  1. Repeated by the Department as telegram No. 1923, December 3, 1 p.m., to the Chargé in China.