Memorandum by Mr. John B. Stetson, Jr., to Major General Donald H. Connolly

Upon my departure from Washington I was instructed to dispose of the problems involved in the dispute emanating from the so-called “Nanking Agreements”. As you are aware I was empowered to make reasonable concessions in the terms of the Agreement of 30 August 1946, and by exchange of correspondence I have since been clothed with more precise authority in this direction.
On 16 January a meeting was held with General P. Kiang30 at which there were present in addition to myself, Major General Philip E. Brown, Mr. Donald B. Davis, Mr. Charles H. Kendall and Capt. S. N. Ferris Luboshez,31 USNR. The known position of the United States in this matter was carefully explained to General Kiang but he emphatically insisted on maintaining China’s stand with which you are already familiar. General Kiang said that he had no authority to make any concession and that Dr. T. V. Soong, the then Prime Minister, would have to be consulted.
A meeting was arranged and held with Dr. Soong on 20 January at which there were present in addition to myself, Mr. Monnett Davis, General Brown, Mr. Davis and Mr. Kendall. Dr. Soong stated that he understood our situation. However, he felt most strongly that it would be impossible for China to abandon the position already taken by the Chinese Government without creating serious embarrassment to that Government. He requested time to reconsider the matter in all its aspects.
In due course General Kiang came in and said that he had been instructed by Dr. Soong to settle the Nanking Agreements dispute with FLC on the best terms available to China. As a result of that, and subsequent conferences, and in view of the necessity of saving face for General Kiang, it was decided not to request a categorical abandonment of the Chinese position, but to eliminate the meat of their claim. With this object a proposed letter was discussed with General Kiang and other Chinese representatives in which no mention was made of the Nanking Agreements but in which the Chinese claim for payment for surplus property sold prior to 30 August was to be abandoned. General Kiang balked at this and requested specific information with respect to all property sold and identification of all contracts [Page 1251] involving the property in question. I agreed to meet his request only to the extent of furnishing him with the total amount of the property sold between 21 June and 30 August, with a statement of the broad categories of such property.
On March 1 Dr. Soong resigned and General Kiang was called to Nanking to confer with the Generalissimo.32 Upon his return he came in and said that he was to retain his office and report directly to the Generalissimo.
On 6 March a meeting was held at which there were present in addition to myself, General Brown, Mr. Davis, Capt. Luboshez, General Kiang and Mr. Wong.33
A letter dated 6 March 1946 [1947] was handed to General Kiang copy of which is inclosed.34 In reply, General Kiang presented a letter substantially in the form desired with the exception that he had substituted for the word “disclaims” the words “will disclaim”, interest in the property. A discussion of this point disclosed that the Chinese representatives had made the change for the purpose of postponing final settlement in order to permit them to check FLC sales figures between 21 June and 30 August. It was pointed out to them that this was unsatisfactory since the object of the negotiations was to settle the Nanking dispute with finality.
Ultimately General Kiang agreed, and signed a letter dated March 6, 1947 a copy of which is enclosed,35 substantially in the form desired by me, of which you were informed in SFLC dispatch No. 1026 of 7 March 1947.36
In view of the circumstances I believe that the settlement arrived at achieves in substance the object desired. It will be recalled that the Nanking Agreements, correspondence and negotiations relating thereto, provide at least an argument for the position taken by China. Under the settlement arrived at the interests of the United States are protected without undue embarrassment to General Kiang and the Chinese Government. Furthermore, no concessions were made in the terms of the Agreement of 30 August 1946.
John B. Stetson, Jr.
  1. Director of Bosey.
  2. General Counsel, Pacific and China, OFLC.
  3. Generalissimo Chiang Kai-shek, President of the National Government of the Republic of China.
  4. Of the Board of Supplies of the Executive Yuan.
  5. Not printed; Mr. Stetson’s letter indicated that not more than $5,260,964 worth of surplus property of specified broad categories had been sold in the Guam area between June 21 and August 30, 1946.
  6. Not printed; General Kiang’s letter asserted Bosey’s disclaimer of any right, title or interest in the property, as set forth in Mr. Stetson’s letter of March 6, not to exceed $5,260,964 in value.
  7. Not found in Department files.