893.48/5–1747: Telegram

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

1081. Embassy replied under date May 6 to FonOff note23 containing request for post-UNRRA relief, our response drafted according Deptel 479, April 23, 7 p.m., repeated Shanghai 662.

Foreign Minister replied under date May 14 stating following designated to conduct exploratory talks with Embassy: P. H. Ho, Director General of CNRRA; Li Cho-min, Deputy Director CNRRA; Dr. Tung Ling, adviser and currently director, American Affairs Dept, FonOff; FonOff Adviser Dr. Cheng Hsi-meng, former Director, FonOff American Affairs Dept.

Informal conversations initialled [initiated] May 15 with Foreign Minister, Butterworth,24 Gilpatric25 and Boehringer26 participated with me on behalf Embassy while Chinese present, included in addition to Foreign Minister, Cheng Pao-nan and those listed preceding paragraph.

Agree that exploratory talks will continue in Nanking through working group headed by Li Cho-min for China. Embassy will be represented by Butterworth, Adler,27 Gilpatric, and Boehringer. Chinese understand that we are interested in receiving promptly their statement of specific relief requirements and will submit this on a [Page 1306] project basis to greatest extent possible. They were cautioned to limit total of such requests to $60,000,000 or less and reminded that this maximum estimate of China’s need as stated by Dept in Congressional hearings in no way indicate U. S. commitment to supply any particular portion of that need, especially in view of expected cut in original amount requested.

Working party meeting later agreed tentatively on schedule and method of relief project presentation which will be reported promptly. Immediately apparent (ReEmbtel 557, March 14, 8 a.m. paragraph 2, point f–2) that Chinese envisage primarily relief through CNRRA along lines previously followed with UNRRA supplies, including maintenance of CNRRA regional office structure and work relief projects, most of which have been carried on in non-deficit food areas. Embassy representatives expressed view that Dept did not have any such program in mind for post-UNRRA period but rather desired to concentrate on direct distribution in areas and amounts where need could be proven, in cash or supply relief through competent voluntary agencies, and on sale through normal channels in cities where rationing and price controls were in force. Embassy has in mind use of post-UNRRA program to induce rationing if possible and, in any event, does not favor extension of CNRRA except where no satisfactory alternative exists. Dept’s determination of this major policy point will be most helpful in negotiating with Chinese application to China of draft post-UNRRA agreement, article II, paragraph a, b, d, and e.

Embassy representatives also brought up question of Chinese procurement in U. S., referring especially to point (b) article IX of draft agreement. Chinese expressed opinion procurement might be made by Universal Trading Corporation, New York City, and/or Chinese Supply Commission, Washington. They stated that UTC qualified as a regular commercial concern and that it would charge only one percent commission for handling procurement details. Embassy representative expressed opinion that UTC was generally considered in American business circles and in U. S. Govt as official Chinese Govt agency; that UTC and Chinese Supply Commission appeared to qualify as official purchasing offices which U. S. Govt had last year requested foreign Govts to withdraw soonest possible, and that Chinese might be severely criticized for handling procurement of relief supplies by use of U. S. Govt funds through these two agencies, especially UTC.

Embassy requests information re Chinese procurement in U. S. under UNRRA program, which Chinese members of working committee assert was done mainly by UTC and/or Chinese Supply Commission. Information also requested Dept’s policy re future use those agencies [Page 1307] for procurement under post-UNRRA program. If Dept attitude negative, would suggestion made by Embassy representatives to have Chinese Supply Commission effect procurement, presumably without charging commission, by means of tenders on C. I. F. basis submitted by American firms be acceptable? Please instruct soonest possible.

Sent Dept 1081, repeated Shanghai 457, May 17, 4 p.m.

  1. See Embassy’s telegram No. 777, April 10, 3 p.m., p. 1302.
  2. W. Walton Butterworth, Minister-Counselor of Embassy in China.
  3. Donald S. Gilpatric, Attaché at the Consulate General at Shanghai.
  4. Carl H. Boehringer, Assistant Commercial Attaché in China at Nanking.
  5. Solomon Adler, Treasury Representative in China.