893.24/3–646: Telegram
The Secretary of State to the Embassy in China
412. For General Marshall. Reurtel 320 of February 18, your recommendation and information in paragraph 1 concerning China’s need for transport, has been reported to the Foreign Liquidation Commissioner who states that his Central Field Commissioner for the Pacific area, Mr. John K. Howard, believed to be presently in his Shanghai office, has also commented on urgency and magnitude of China’s need and will do everything possible to conform his operations to aims of your mission. Howard’s permanent headquarters are Manila. No objection here to exhausting amount of Yuan debt by sales of surplus property needed by China.
- 2.
- Regarding your paragraph 2, we agree items 3 and 4 of Ourtel 10192 should be settled on 3 (c) terms if item 4 not necessary for Yuan offset. Concur in settlement of item 7 of Ourtel 101. Re shipyard [Page 959] transaction Item 9 of Ourtel 101, feeling here is that since offset principle now accepted by China, this transaction could be handled more simply by offsetting it also against Yuan debt. This recommendation made recently to Howard by Foreign Liquidation Commissioner. Acceptance of payment for surplus in form of services rather than cash is presently involved in extensive legal technicalities which will take considerable time to straighten out. However, will continue efforts along this line if you so recommend.
- 3.
- Regarding items 5 and 6 of Ourtel 101, referred to in your paragraphs 2 and 3, Congress already informed of continuing military lend-lease aid to China, and of policy in British lend-lease settlement not to charge for military supplies (except commercial-type aircraft and petroleum) remaining with United Kingdom because U. S. reserves right to recapture such supplies. Consequently, political repercussions regarded as minimum if we do not require financial settlement for items 5 and 6 of Ourtel 101 (except for commercial-type aircraft and petroleum) and reserve recapture rights. This is on assumption that item 6 not needed for Yuan offset. China may be asked by Treasury to seek no repayment for 1946 Yuan advances in view of proposed writing off of items 5 and 6.
- 4.
- Treasury participated in drafting of above and concurs therein.