811.42700 SE/8–2647: Telegram

The Ambassador in China (Stuart) to the Secretary of State

1806. Reference the August [June] 16, 1947 revised draft of agreement to implement the Fulbright Bill and surplus property agreement, following are the results of negotiations with the Foreign Office. All references are to June 16 draft.

Preamble agreed.

Article 1—Deletions and additions approved except on two points: 1. Foreign Office prefers that the phrase “in the capital city of China” be left in. Embassy concurs. Last sentence of first paragraph inserted by Department and beginning “except as provided in Article 3.” Foreign Office states it cannot accept this provision since it is not clear what its intention is, it is too broad in scope and constitutes an unnecessary limitation on Chinese legislation. Embassy is inclined to agree.

Article 2—Section 4. Foreign Office holds to previous view that this section should be eliminated. Since the agreement does not specifically [Page 1284] prohibit the acquisition of real property, Embassy does not believe that this provision is worth arguing about. Other deletions and additions approved.

Article 3—approved. Article 4—the Foreign Office proposes following wording for article 4: [“] The Foundation shall plan its annual programs in such a way that full use shall as far as possible be made of the funds made available for each year. The Foundation shall not enter into any commitments or create any obligation which shall bind the Foundation in excess of the funds actually on hand.” Embassy recommends approval.

Article 5—in view of Foreign Office agreement that the Board of Directors shall be composed solely of American citizens with Chinese advisors, Embassy and Foreign Office agree on following wording of article 5:

“The management and direction of the affairs of the Foundation shall be vested in a Board of Directors (hereinafter designated the ‘Board’) consisting of five directors.

The principal officer in charge of the diplomatic mission of the U. S. of America to the Republic of China (hereinafter designated ‘Chief of Mission’) shall be chairman of the Board. He shall have the power of appointment and removal of members of the Board at his discretion. The four other members of the Board shall be as follows: (a) two members of the Embassy Staff, one of whom shall serve as treasurer; and (b) two citizens of the U. S. of America, one representative of American business interests in China and one representative of American educational interests in China.

The two members specified in (b) of the last preceding paragraph shall be resident in China and shall serve from the time of their appointment until the succeeding December 31 next following such appointment. They shall be eligible for reappointment. All the four members shall be designated by the Chief of Mission. Vacancies by reason of resignations, transfers of residence outside of China, expiration of term of service, or otherwise shall be filled in accordance with this procedure.

The Chinese Govt shall appoint a number of advisors to the Board, who shall attend all the meetings of the Board and participate in its discussions. The advisors shall have no vote but their opinions shall be given due consideration by the Board at all its deliberations.

The directors and advisors shall serve without compensation, but the Foundation is authorized to pay the necessary expenses of the directors and advisors in attending meetings of the Board.”

Articles 6, 7, 8, 9, and 10. Agreed.

Article 11—Foreign Office agrees that this article shall now read as follows, in accordance with suggestion in Dept’s 239 [939], July 30, 6 p.m.:

“The Govt of the Republic of China shall, within 30 days of the date of the signature of the present agreement, deposit with the [Page 1285] Treasurer of the U. S. of America an amount of Chinese national currency equivalent to $250,000 (U. S. currency). Thereafter commencing with January 1, 1948, the Govt of the Republic of China shall similarly deposit on every January 1, April 1, July 1, October 1, of each calendar year within the period January 1, 1948, to September 30,1967, inclusive, an amount of Chinese national currency equivalent to $250,000 (U. S. currency). The Govt of the U. S. of America shall deposit all Chinese national currency so received to the credit of the Foundation in a depository to be designated by the Secretary of State of the U. S. of America. The rate of exchange between currency of the Govt of the Republic of China and U. S. currency to be used in determining the amount of currency of the Govt of the Republic of China to be deposited from time to time hereafter, shall be at the par value between Chinese dollars and U. S. dollars established in conformity with procedures of the International Monetary Fund or determined on an equitable basis upon which the Govts of China and the U. S. may mutually agree.”

It will be noted that there are two changes. The first is the first payment shall be January 1, 1948, since it will be too late for any effective use to be made of payment during fourth quarter of 1947. The second change is that the second paragraph on guarantee against exchange loss, as proposed in the Dept’s telegram under reference, is eliminated since Foreign Office believes that the provision for determining the exchange rate on an equitable basis mutually agreed upon constitutes sufficient protection. In lieu of the second suggested paragraph, Embassy has therefore proposed that the second sentence of the first paragraph shall read as follows: “Thereafter, commencing with January 1, 1948, the Govt of the Republic of China shall similarly deposit during every quarter of each calendar year upon demand within the period January 1, 1948, to September 30, 1967, inclusive, amounts of Chinese national currency whose total amounts shall not exceed the equivalent to $250,000 (U. S. currency).” Foreign Office is considering this change.

Articles 12 and 13—Foreign Office still insists that these two articles must be deleted, since this agreement must be ratified by the Legislative Yuan. Foreign Office alleges that the Yuan will not approve any agreements specifying these types of exemption for other than diplomatic personnel. Foreign Minister admits that he foresees no difficulty in granting these exemptions in actual practice but that he cannot agree to their incorporation in the agreement. In view of the nature and importance of the concessions made to the U. S. by China on this agreement, Embassy is inclined to believe that articles 12 and 13 are not of sufficient importance to warrant an argument. Department’s instructions are requested.

Articles 14, 15, and 16. Agreed.