Foreign Relations of the United States, 1946, The Far East, Volume VIII

740.00119 Control (Japan) /11–1846

Memorandum by Mr. Robert W. Barnett, Alternate United States Member of Committee No. 1 on Reparations, Far Eastern Commission³²

[Washington,] 25 October 1946.

Chinese Views on the Reparations Settlement

1. On Wednesday, October 23, Dr. Wang,³³ Chief of the Chinese Purchasing Mission and Chinese member of the FEC Reparations Committee, invited me to lunch with him. Accompanied by his two economic assistants, Mr. Tsien and Dr. Koo,³⁴ he took me to his home in order, he said, to have a quiet and frank discussion of problems uppermost in his mind.

2. The Chinese delegation in the Far Eastern Commission has reluctantly come to the conclusion that the United States Government feels itself committed to live up to the assurance, contained in the Potsdam Declaration, that “Japan shall be permitted to maintain such industry as will sustain her economy”, but is not similarly concerned in standing by the assurance, also contained in the Potsdam Declaration, that there shall be “the exaction of just reparations in kind.”

3. Neither in the Far Eastern Commission nor at the Headquarters of the Supreme Commander for the Allied Powers in Japan have the Chinese found convincing evidence of any genuine desire to provide war damaged countries with what they want and need for their own reconstruction, out of Japan’s resources.

4. The United States has made progress, to be sure, in securing Far Eastern Commission adoption of the Pauley Interim Reparations Removals recommendations. The Chinese Government does not regard that program, however, as being designed to answer desires for reparations so much as to meet broad industrial disarmament objectives. While not opposing ultimate Japanese industrial disarmament, the Chinese challenge the assumption that the mere transfer of surplus heavy industrial capacity from Japan constitutes proper or adequate compensation for Chinese war suffering.

5. Assuming that the United States is in earnest when pressing for industrial disarmament, the Chinese Government has become profoundly concerned over the assumptions which seem to underlie American calculations of the “minimum peacetime economy for Japan” being assured the Japanese people,—a level which the Chinese could consider a luxury level for their own country. The Chinese have abandoned, officially, the suggestion that Japanese standards of living should be pulled down to Chinese standards or even to levels “no more than 100% higher than the Chinese standard of living.” However, they are now making observations, Dr. Wang said, upon which conclusions as to where America’s primary sympathies and interests in Asia actually lie.

6. Dr. Wang’s general observations were prompted by a problem pending in the Reparations Committee. Nine countries are agreed that recipient countries should bear costs of transporting reparations assets from the port of shipment in Japan to a port in the recipient country. The Chinese Government fears that shortage of Chinese bottoms and the deteriorating state of Chinese foreign exchange reserves doom Chinese reparations assets to immobilization at Japanese ports unless the Japanese themselves bear the responsibility of transportation. The Chinese recognize the complications, administrative, physical and financial, which would arise if all countries could enjoy the same service. They consider themselves in a dilemma which can be resolved only by United States sympathy for and interest in China’s special grievance against Japan and the monumental character of China’s problem of economic reconstruction.

7. The Chinese have begun to think that present moves made towards a reparations settlement may have proceeded within an entirely misconceived pattern of assumptions. Just reparations, measured in terms of real and actual value, can not be accomplished except within very narrow limits as a mere by-product of a program of industrial disarmament. In order to obtain their “just”, indeed, urgently needed, reparations, the Chinese seem to be willing to consider (1) temporary abandonment of the industrial disarmament program in Japan, (2) revival and rehabilitation of the Japanese economy on a maximum productivity basis, (3) restriction of Japanese domestic consumption to minimum levels, (4) export on reparations account from current production involving, where necessary, raw material import commitments from claimant countries, (5) ultimate retirement or transfer, at an agreed upon time, of heavy industrial productive capacity dangerous for security reasons.

8. The Chinese claim that they could not have presented such a proposal at an earlier time because they do not possess the facts needed regarding the Japanese economy. I rejected this excuse and placed upon the Chinese themselves the blame for permitting consideration of the reparations problem to have proceeded to this point along lines which they feel are inconsistent with their most vital national needs.

9. It was my personal feeling that any halfway compromise veering towards the above views initiated by the State Department would excite alarm in SCAP, who could not foresee its balance of trade implications, and for entirely different reasons would be construed by the Soviets as added evidence that the United States Government pursued the objective of making Japan a strong economic bulwark. The Chinese views, however, do pose a searching question as to whether American thinking on reparations from Japan is likely to accomplish any of the objectives implied by the term “just reparations.”

32. Addressed to the Chairman of the Commission (McCoy) and to members of the U.S. delegation, Hugh Borton and Edwin M. Martin.
33. Wang Shou-chin, of the Chinese delegation, Far Eastern Commission.
34. K. K. Tsien and Anthony Koo, of the Chinese delegation.