800.48 FRP/7–847: Telegram

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

1482. 1. All program planning for U. S. foreign aid to China in post-UNRRA period will be kept within foreign exchange expenditure limit of $30,000,000 accordance Deptel 812, July 1, 4 p.m. Chinese will be advised also that this is conditional maximum pending final appropriation by Congress of full $350,000,000 and further review in Washington by Department of all claims.

2. Reference telegram’s repeated emphasis on famine relief as basis desired in Department for foreign aid raises questions as follows, which need specific answers promptly and prior to planning program here along lines presently envisaged after consideration of all factors involved:

Is U. S. Government bound in any way to use the post-UNRRA aid program in China for direct famine area relief? Reference telegram advises Congress told “program would be undertaken only if needed to assist in meeting emergency famine conditions”, and later states Department’s “objectives can be only to help meet spot hunger conditions in particular areas”. These points have not been made in any previous telegrams or instructions received; also Embassy in past few months has proceeded on assumption that Department accepted its contrary conclusion that large-scale direct relief operations in interior were impractical for many reasons. Besides, insistence on such operations in case of China would be exception to policy being followed in Europe as indicated Italian agreement quoted Deptel 776, June 25.47 As Chinese had copy of original draft agreement, it is [Page 1325] obvious that they are aware of general plan being followed by Department.
Are Embassy and Chinese Government now to infer that program in case of China is not designed to “provide foreign exchange to countries which otherwise could not purchase food and other relief supplies”? From political, economic and bargaining viewpoint, it has been assumed here that foreign aid program should be integrated with any constructive Chinese efforts to put their house in order, and achieve thereby not only greater internal stability but also more effective utilization of indigenous and imported food supplies. Statements [in] Department telegram that Chinese program is not expected to “have marked effect in preventing economic collapse” as apparently envisaged in European countries, and that, for China, “funds in any case are insufficient to make appreciable effect on Chinese economy” imply rejection of Embassy’s thesis that $60,000,000 could have provided constructive and measurable support to Chinese economic position at this time.
Is Department, as indicated in reference telegram, still of positive view that we should expect Chinese Government to finance almost entirely “actual distribution costs of US imported relief supplies”, and in that connection, that we accept principle of work relief on a large scale? Chinese Government’s inability to afford and unwillingness to provide extensive local currency expenditures for relief, and misuse throughout China of vital food supplies in connection with work relief programs are two most outstanding lessons learned in course of UNRRA experience here. Embassy has grave doubts that past ills and abuses this connection could be overcome in new program of comparatively token proportions.

3. Butterworth prepared to discuss the above and other topics relevant to post-UNRRA program on his arrival in Washington. Suggest he be consulted prior to dispatch of any reply since he is conversant in detail with thinking here. It seems almost imperative that there be higher accord achieved between views held in Washington and those developed here, or that Department proceed to prepare independently instructions which can guide operations of relief advisory staff when latter is finally selected and organized.

Sent Department as 1482; repeated Shanghai as 610 July 8, 2 p.m.

  1. Not printed.