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

893.24/12–745: Telegram

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

Chungking, December 7, 1945—2 p.m.
[Received 3:53 p.m.]

2116. For Secretary [of] State and Secretary [of] Treasury. Property of Army in west China.

1. ReEmbtel 2053, November 28. On morning of November 29 meeting of representatives of State, Treasury, FLC (Foreign Liquidation Commission) and Army was held with Gen. Wedemeyer. Gen. Wedemeyer indicated that in view of the urgent military necessity of disposing of property in west China he did not feel that he could make a settlement contingent on acceptance by the Chinese of proviso in 4 (c) of Embtel November 28, although, of course, he would ask for it from Dr. Soong in the first instance and from the Generalissimo in the second. State, Treasury and FLC representatives opposed a settlement without this proviso but conceded that final decision in this instance would be Gen. Wedemeyer’s.

2. Gen. Wedemeyer saw Dr. Soong later and Dr. Soong refused to accept the proviso, although he offered a paper compromise which is quoted below. Gen. Wedemeyer could make no progress with Generalissimo on subject of proviso and he signed a contract with Dr. Soong on the evening of November 29, a copy of which is being forwarded by mail.⁸⁹

3. The following is gist of contract:

a. China acquires U. S. Army property in west China for U. S. $25 million and CNC $5,160,000,000, the latter to be deducted from total of CN dollar advances made by China to the U. S. Of the former U. S. $5 million will be paid in cash and “U. S. $20 million will be payable in accordance with the terms of a contract to be negotiated between China and U. S. Treasury Dept which contract will provide for (1) principal to be paid in 30 equal annual installments. (2). Interest at 2⅜%. (3). Any surplus of settlement of U. S. indebtedness to China for military expenditures in excess of China’s cash down payments for surplus property of U. S. will thereupon be used by China for purchase of property in U. S. or will be applied to liquidation of the unpaid balance of this contract”.

b. The contract supersedes the October 25 contract.⁹⁰

c. It is the understanding of the U. S. and China that this agreement does not set a precedent in connection with disposal of any other U. S. property to China.”

4. It is the consensus of State, FLC and Treasury representatives’ opinion that compromise in (3) a–3 above is fundamentally a paper one and constitutes a bargaining victory for China. There [They?] are determined however to make every effort to have the offset principle of 4–c of Embassy’s telegram 2053 inserted in future contracts on sales of surplus property to Chinese Govt.

Robertson

89. Not printed; the agreement was signed on behalf of the United States by Brig. Gen. George Olmsted.
90. Not printed; a copy is found among the records of Lend-Lease in the file marked “OFLC–Manila—John K. Howard”. The agreement was signed by Brig. Gen. Olmsted and Dr. T. V. Soong.