Office of the Historian

893.24/11–2845: Telegram

The Chargé in China (Robertson) to the Secretary of State

Chungking, November 28, 1945—10 a.m.
[Received 11:10 a.m.]

2053. For Secretary of the Treasury from Adler. Review of present status of Army property81 in West China.

1.
This property has not been declared surplus and can be disposed of by Commanding General on emergency basis. He has decided that he should do so on grounds of military necessity in view of dangers to American lives in protecting this property and wishes to do [so] in consultation with other interested agencies.
2.
He has received War Dept’s agreement to his selling to Chinese Govt on following lines:
  • “(a) China to pay a fair price for the property transferred with generous allowance for depreciation, the net price and draw payment to be specified in the agreement.
  • (b) Terms of payment to be negotiated subsequently by Treasury, agreement on terms of payment to include provision that any surplus of settlement of U. S. indebtedness to China for military expenditures in excess of China’s cash down payments for surplus property acquired by her be used for immediately offsetting her debt on such surplus property.”
FLC (Foreign Liquidation Commission) Washington concurred provided Howard and State and Treasury representatives in China concurred.
3.
After discussions among War, State, FLC and Treasury representatives here, discussions with Dr. Soong were initiated. He was informed that we had
(a)
Property acquired at cost of CN dollars 12 billion to us which after making due allowance for depreciation was worth CN dollars 5 billion. Army proposed that this CN dollars 5 billion be offset against Chinese Govt no-rate CN dollar advances to our army for fourth quarter of 1945, to which Soong agreed.
(b)
U. S. dollars 67 million of U. S. Air Force and Service of Supply property after due allowance for depreciation, etc. Soong offered us U. S. dollars 20 million for this property on terms of payment identical with Clause Three C of Belgian Lend-Lease agreement.82
4.
After discussion among representatives of interested U. S. agencies, it was agreed to make the following counterproposal to Soong on 3 (b) above:
(a)
A price of U. S. dollars 30 million.
(b)
A cash down payment of U. S. dollars 5 million.
(c)
Embassy and Treasury Attaché to urge Treasury to agree to clause Three C terms of payment with the provision that any surplus of settlement of United States indebtedness to China for military expenditures in excess of China’s cash down payments for surplus property acquired by her be used for immediately offsetting for [her] debt on such surplus property.
5.
Soong’s reply was that he would discuss the question with the Generalissimo. On November 27 Soong made the following offer after his discussion with the Generalissimo.
(a)
A price of U. S. dollars 25 million.
(b)
A cash down payment of U. S. dollars 5 million.
(c)
Terms of payment to be those of Clause Three C Lend-Lease agreement [Act].
6.
Minister Robertson and I agree that Commanding General be advised to accept Soong’s offer on condition that provision in 4 (c) above be included in terms of payment. Howard of FLC willing to accept this as settlement though he feels price too low. I strongly [Page 1188] urge Treasury to agree to terms of payment indicated in 4 (c) above but advise against accepting terms of payment so far proposed by Soong. Would appreciate your response as soon as possible in view of urgency of question. [Adler.]
Robertson
  1. Under procedures then in force, the War Department, as the owning agency, was empowered to declare surplus fixed installations such as airfields and telephone toll lines in China and elsewhere; however, the development of disposal plans was the responsibility of the Foreign Liquidation Commissioner in the Department of State. Letter of December 22 from Williard L. Thorp, Deputy to the Assistant Secretary for Economic Affairs (Clayton), to Brig. Gen. D. N. Hauseman, Director, Readjustment Division, Headquarters Army Service Forces, not printed (800.24/12–445).↩
  2. Signed at Washington, June 16, 1942, Department of State Executive Agreement Series No. 254, or 56 Stat. 1504. This agreement has no clause Three C, the reference being to Section 3 (c) of the Lend-Lease Act of 1941.↩