Marshall Mission Files, Lot 54–D270: Telegram
Brigadier General Bernhard A. Johnson to Mr. Thomas B. McCabe
29803. Reference your 240605 and 24063498 just received today. The so-called Mar contract will henceforth be known as the Dockyards contract, as Rear Admiral Chow99 has been designated by the Chinese Government as China’s signator on the contract. He, Admiral Chow, has copies of the contract and is now in Chungking to get Generalissimo’s1 final approval and the entire contract which will run somewhere between 10 and 15 million dollars, should be signed in the [Page 1079] next few days.2 Copies of the Kiangnan and Tsingtao want lists have been forwarded to both the Manila office and our Washington office, incidentally twice in duplicate to Washington. Agree with you that as soon as contracts signed Admiral Chow or Admiral Mar should appoint an agent to accompany one of our men to follow through on the property involved. The Dockyards contract is satisfactory to all concerned as per Washington’s suggestions and we have advised Washington regarding needed credits. As soon as the contract is signed we will get the expediters started.
New Subject: After the Chinese buying commission has looked at the property on Okinawa and has seen the almost deplorable condition in which considerable amount of transportation, construction and engineering equipment, especially old Seabee equipment, is found, I conscientiously feel that even 50 percent of depreciated cost on all surplus is a good price, especially as much of the cream has been sold or shipped. I expect this week a definite proposal from Doctor Soong. This proposal will, I believe, be in the nature of a bid not to exceed 50 percent of depreciated cost on all surpluses in China, in Japan, on Okinawa and on other Pacific air bases up to the amount we want to sell them. I expect to take up the matter of overall price with Doctor Soong and General Marshall this week and I’ll advise you of progress.
I realize that China should not have any better deal than UNRRA.3 Frankly 75 per cent of every dollar that UNRRA buys with is the money that we are giving not loaning to UNRRA. In addition thereto, UNRRA China at least, is endeavoring to buy selectively at 50 cents on the dollar and since your contract was signed UNRRA has bought little or nothing from us because we will not sell selectively new goods at 50 cents on the dollar.
Part of our purpose in selling surplus to China is to rehabilitate China and if we sell at too high a price we thereby make her, China’s, notes to us of less ultimate value.
To date I believe that the only fault that General Marshall has found in our, FLC, dealings is that we may have sold China at prices a little too high.
[Page 1080]I believe that at 50 cents on the dollar depreciated cost that we will recover somewhere between 35 and 40 per cent. While the proposed formula will not apply to ships, airplanes or scrap, I believe that a recovery of 35 to 40 per cent on as much surplus property as will be involved in this deal is good and will be equal to or above the average.
- Neither found in Department files.↩
- Chow Hsien-chang, Deputy Director of the Chinese Ministry of Naval Affairs.↩
- Chiang Kai-shek, President of the National Government of the Republic of China.↩
- Contract (No. W–FLC (CH) 338 CN–1) not printed. It was signed, presumably in Shanghai, on May 15, by Brigadier General Johnson and Admiral Chow and was witnessed by Admiral Cooke and T. C. Chien, Mayor of Shanghai. Under its terms, the United States agreed to make available to China various surplus property, subsequently to be itemized and priced on schedules which were to be attached to the contract. The Chinese agreed to pay the purchase price, including packing, crating and transportation costs, in 30 annual installments at an interest rate of 2⅜% per annum. The United States was granted the option of securing, in lieu of annual cash payments, goods and services in the form of maintenance, repair and operating supplies to the U. S. Navy and U. S. Government-owned vessels at a rate not to exceed 25% of the capacity of the Kiangnan and Tsingtao yards.↩
- United Nations Relief and Rehabilitation Administration.↩