Foreign Relations of the United States: Diplomatic Papers, 1945, The Far East, China, Volume VII

893.51/8–1845: Telegram

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

Chungking, August 18, 1945.
[Received August 19—10:05 a.m.]

1383. Dr. Soong was not in good standing with his Government when I arrived in China. I found very few Chinese who were western-minded. Dr. Soong’s Harvard education, his 11 years’ banking experience in the United States and long official service there has given him an insight to the American situation that is unsurpassed by any Chinese I have ever known. In the dark days when the collapse of the Chinese National Government was freely predicted, when the Chinese Armies were in full retreat and when there was what appeared to be an unbreakable deadlock between the Generalissimo and the American High Command, I turned instinctively to a Chinese who could understand what I was saying and could make the Generalissimo understand. Conversely he could make me understand the Generalissimo. This is a prelude that will indicate my close relations with Dr. Soong. I now feel that I must attempt to convey to you the present attitude of Dr. Soong toward the United States.

Dr. Soong has said to me that he will discuss with appropriate officials in Washington the question of a grant, a loan or other form of economic assistance to China. Soong said that if the United States does not give him the kind of aid he desires he will obtain it from the British. Personally I see no objection to this attitude. In fact, I would be among those who would be happy if he could obtain from the British some of the economic assistance that China unquestionably needs. I may be telling you some facts that you already know about Soong; however, if you wish to ascertain the character of his former transactions with the United States, you should consult General Marshall,¹⁹ the Secretary of War²⁰ and, perhaps, certain officials of the State Department.

The highest officials of the Chinese Government have told me categorically that China does not wish to become a “debtor nation”, that China wishes her post-war economic relations with the United States to be on a mutually beneficial basis. When Dr. Soong recently returned in triumph from America he was able to tell the Chinese that:

1. He received a very favorable press in America. He actually boasted to the Chinese that he had.

2. Obtained an unconditional commitment for dollars gold 200 million.

3. He obtained what he termed a virtual commitment for 20,000 tons of textiles on Lend-Lease and,

4. 15,000 trucks later increased to 19,000.

Soong said that the Chinese Government was prepared to pay cash for the textiles. Notwithstanding this, Mr. Willauer, of FEA, former President of the China Defense Corporation, advocated that the textiles be furnished under Lend-Lease. Willauer obtained approval for free textiles for China on the ground that they constituted a military requirement. Actually all military requirements had been filled and FEA representatives in China had disapproved the request to furnish the textiles in question under Lend-Lease. The position of the FEA officials here was that the giving of textiles to be sold to provide revenue for the Government was equivalent to Lend-Leasing money. In his elation over his success, Dr. Soong was disparaging in his estimate of the character and business capacity of the gentlemen who supplied China and Dr. Soong with the above money, equipment and goods.

In the conversation with Robertson, Economic Minister, and me on July 26th, in which we presented the views of the State Department in regard to the Yangtze-Gorge project as outlined in 1075, July 11th,²¹ Soong appeared impatient and remarked that if the United States did not approve the project the necessary financial assistance could be procured by him elsewhere. In a later conversation with me he remarked that he was not interested in whether the State Department approved or disapproved. He said he knew how to handle the situation in Washington and that he would get what he wanted. He went further to say that a “no” from the State Department is always helpful to him with the other agencies in Washington. Recently Soong has indicated that in every phase of business he desires to transact with the United States he wants to bring some kind of a “squeeze play” into operation. He told me that in the event he did not get what he thought China needed in Washington on the present visit he intended to visit both Canada and England before returning to China and that he was certain he would obtain assistance from them. Soong’s attitude in endeavoring to obtain American approval of his requests by threatening that unless the kind of assistance he required is immediately forthcoming he will obtain it from others seems to have infiltrated to other departments of the Chinese Government. A letter, dated July 20th, from General Chen Cheng, Minister of War, to General Wedemeyer, making requests for certain Lend-Lease supplies, concluded with the following paragraph, “Should it not be possible for the United States Government to supply the above equipments within a short period, this Ministry intends to make application to the Canadian authorities in the matter”. In this connection the equipments which the United States has been requested to supply for the X, Y and Z forces would constitute more equipment than that required for four times the military forces of Canada. On the suggestion of the Army, the letter of General Chen Cheng was withdrawn and resubmitted without the offending sentence.

It should be recalled that in his conversations in Washington in May, Soong stated that unless China received free gold from America “a disastrous financial collapse is plainly indicated which will inevitably be followed by military collapse”. In other words, every favor that Dr. Soong requests is accompanied by a threat of damage to the United States unless his request is immediately fulfilled. Dr. Soong has said that the continued selling of gold is the most important single weapon for combatting inflation in China. Dr. Soong returned to Chungking on June 19th. On July 26th the sale of gold was suspended altogether. The sale of gold was resumed on July 31 but sales have been only nominal. Soong did place a 40 percent tax on gold profits, which accounts in part for the fact that capital is not attracted to gold purchases. There is little pretense of using gold as an anti-inflationary weapon. The winning of the war is having an effect on inflation.

We are advised that the Chinese Government has not replied to the Treasury’s proposal that China institute a one-half billion currency stabilization fund for its existing exchange in America. Soong told me that he would not establish such a fund out of Chinese resources but inasmuch as it had been suggested by the American Treasury Department he expected on this visit to obtain the stabilization or revolving fund from the United States. I have related the foregoing to you with great reluctance. I am on the most friendly terms with Dr. Soong. I have advised him that his attitude toward the United States is wrong. That the various “squeeze plays” that he proposes are naive. If he wishes to do business with the United States from here out, he must approach our Government officials on a realistic basis. That all the threats about the collapse of the Chinese Government, the defeat of the Chinese parties and disaster to the American cause in China are all now obsolete.

I am convinced that the United States is interested in the economic future of China. China in my opinion, is willing to acquire economic aid from the United States on a mutually beneficial basis and not as a gift.

Hurley

19. General of the Army George C. Marshall, Chief of Staff, U. S. Army.
20. Henry L. Stimson.
21. Post, p. 1431.