Office of the Historian

893.51/4–1246: Telegram

The Counselor of Embassy in China (Smyth) to the Secretary of State

Chungking, April 12, 1946—6 p.m.
[Received April 13—6:10 a.m.]

670. It is urged that any definitive commitment to China by Eximbank on 500 million loan and also publication of proposed press release be deferred until General Marshall has returned to Chungking and has opportunity to evaluate situation himself. (Reur 616, April 9, for Adler from Treasury.17) Deterioration of internal political and military situation reported in General Gillem’s 461, of April 8 to Warcos18 for General Marshall has since been accentuated. Situation with regard to reorganization of Government and drafting permanent constitution now in complete deadlock and there is [no?] progress toward implementation of PCC agreements.19 Fierce Communist editorial against the Generalissimo and the Generalissimo’s interview with UP20 Far Eastern manager Vaughn, most of which Embassy now learns Generalissimo subsequently asked to be treated as “off the record”, but which we are sure must have leaked out in leading political circles here, both reflect and aggravate worsening internal political relations. (See Embtel 655, April 10.21)

It is Embassy’s considered opinion that definitive commitment on or announcement of loan prior to General Marshall’s return would deprive him of a most powerful weapon when it is most needed.

It would therefore seriously weaken his hand in reversing the present trend and bringing parties back to path on which he had set them. In particular, announcement that “General Marshall has reported that China has made substantial advances toward peace and unity and toward rehabilitation of its economy” at a time when much of progress made under his direct influence has been lost and when all of it is in grave danger of being dissipated would seem ill-advised. Colonel Caughey22 representing General Gillem in Chungking, and Treasury Attaché Adler concur.

Please show to General Marshall.

Smyth
  1. Not printed.↩
  2. Vol. ix, p. 742; Warcos was symbol for Chief of Staff, War Department.↩
  3. For Chinese Political Consultative Conference agreements, see United States Relations With China, pp. 610–621.↩
  4. United Press Association.↩
  5. Vol. ix, p. 167.↩
  6. Col. J. Hart Caughey, Executive Officer on General Marshall’s staff in China.↩