Foreign Relations of the United States, 1946, The Far East: China, Volume X

893.00/1–3046: Telegram

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

Chungking, January 30, 1946—9 a.m.
[Received January 31—4:30 a.m.]

188. From Harriman.² Generalissimo Chiang³ told us Monday evening that his people in Manchuria have had discussions with Marshal Malinovski⁴ regarding the Russian claim that Japanese industrial equipment in Manchuria are war trophies and subject to removal. (Repeated to Moscow for Kennan⁵ as No. 22). Malinovski has indicated that the Russians were willing to leave this equipment in Manchuria providing they received shares of stock in the enterprises. He demands a 51% interest in heavy industries and a 49% interest in light industries. The Generalissimo estimates that the specific industries involved represent about 70% of Manchurian industry previously under the control of the Japanese. The Generalissimo states that he will under no circumstances give the Soviets 51% of the stock of any industry because of the Chinese law which forbids foreign control of Chinese industry. On the other hand he appears to be willing, in order to prevent the Russians from removing this equipment and thus destroying the economic life in Manchuria, to give the Russians a substantial interest in many of the industries. (He has no knowledge of the quantity of equipment already removed.)

It seems to me that we should not accept or condone the Soviet position. I have understood that it has been consistently our policy that Japanese industrial properties in Manchuria should be available for reparations, principally in China, for the damage done to China. The subject has never to my knowledge been taken up with us by the Soviet Government. The question of war trophies was raised by Stalin⁶ with Soong⁷ when the latter was in Moscow (reported in my Navy cable No. 081341, August 8, from Moscow.⁸) I informed Soong of the contents of the Department’s reply (No. 1775 August 9, 1 p.m., to Moscow⁹) stating the United States Government position as described above. I did not, however, inform the Soviet Government as my instructions stated that I should do so only if the subject was raised by the Soviet Government with me. In addition Soong was not keen to have me raise the question for the reasons (1) that it might complicate the conclusion of the negotiations which were extremely difficult at that time, and (2) that Stalin’s attitude as to the quantity of equipment the Russians would demand appeared to be a small percentage and Soong thought it would be best to leave the question for future negotiations.

The subject of Russian participation in Manchurian industry was, however, argued out by Soong in connection with the railroads. Stalin at first demanded that the coal properties and certain other industrial properties which had been associated with the railroads should come under the joint control of the railroad. Stalin later withdrew from this position and specifically agreed that only a few of the coal properties directly supplying the railroads should be included. The large Fushun Coal property was specifically excluded. Now the equipment of Fushun is on the list of war booty.

It seems to me that this is a case of vandalism and theft. The industrial equipment is of great value in place and has relatively small value if removed. Also, Stalin made it clear to President Roosevelt at Yalta that his demands for entry into the war were fully met by the agreement then reached.¹⁰ This is another case of the Russians attempting to obtain more at a later date.

If we now acquiesce in the Russian demands for the ceding by China of an interest in these important industrial enterprises in return for the abandonment of their demands for war booty, Russia will dominate Manchurian industry and economy which will seriously affect American commercial interests and the whole policy of the open door. You will recall that in my conversation with Stalin in August (Embassy Moscow’s No. 3077, August 27¹¹) he accepted the open door policy and agreed to make a public announcement to that effect. However, this has never been done.

General Marshall¹² had advised the Generalissimo to delay his negotiations on the above matters until the agreement with the Communists is concluded. The Generalissimo has accepted this advice which seems to me wise, even though it may delay the withdrawal of Russian troops from Manchuria. The Soviets have indicated that they are unwilling to leave Manchuria until the question of war booty is settled.

I recommend, however, that this matter be given immediate attention and that our position be stated promptly to the Soviet Government. I believe that ways and means must be found to bring pressure on the Russians to take a more reasonable attitude.

I have discussed this message with General Marshall and he concurs. [Harriman.]

Smyth

2. W. Averell Harriman, Ambassador in the Soviet Union, en route to the United States.
3. Chiang Kai-shek, President of the National Government of the Republic of China.
4. Commander of forces of the Soviet Union in Manchuria.
5. George F. Kennan, Chargé in the Soviet Union.
6. Iosif Vissarionovich Stalin, Chairman of the Council of Commissars of the Soviet Union.
7. T. V. Soong, President of the Chinese Executive Yuan.
8. Foreign Relations, 1945, vol. vii, p. 958.
9. Ibid. p. 965.
10. Signed February 11, 1945. For text, see Foreign Relations, The Conferences at Malta and Yalta, 1945, p. 984; for correspondence, see pp. 361 ff.
11. Foreign Relations, 1945, vol. vii, p. 981.
12. General of the Army George C. Marshall, Special Representative of President Truman in China.