121.893/7–1447

State Department Briefing for Wedemeyer Mission

[Here follows section on Korea.]

China

1.
Mr. Arthur Ringwalt15 conducted the briefing on China. He said the Chinese expect us to wipe out the $500,000,000 loan.16 He then explained in considerable detail matters pertaining to the Lend-Lease settlement. The gist of his explanation was that for $900,000,000 worth of surplus property we are to get $230,000,000.16a
2.
The contract expires 22 months from the date of contract. The mechanics are set up, but the turnover of equipment is faster than the Chinese can take it. No inventory of the property has been completed.
3.
The Chinese should collect surplus property in the Pacific Islands more rapidly. Property is deteriorating and ships are not conducting full loading or unloading operations. It is very inefficient. The Chinese are responsible for collecting and moving the property to ports.
4.
It would be advantageous to expedite completion of the 8⅓ Air Group Program. The military part of this program was deferred during the Marshall Mission.17 General Marshall has now relaxed restrictions somewhat, and maintenance material can now be sent.18 (See Gen. Thomas reference his recently completed survey of surplus property.)
5.
Two other programs include the Building Program in which the Chinese give Americans housing and other facilities, and the Fulbright Bill19 which deals with cultural relations. Approximately $35,000,000 U. S. is involved in the Building Program, and $20,000,000 is involved in the Fulbright Bill.
6.
There is also a $1,800,000 Motor Maintenance Program, in which the OFLC20 signed a contract in December 1946 without consulting other Government agencies.21 The United States is in a rather difficult position, because it does not have the materials unless we go into procurement competition with Greece, Turkey, and other requirements.
7.
There is a $350,000,000 Post-UNRRA22 program. Providing that Congress authorizes the maximum appropriation of $350,000,000 for the post-UNRRA program, it is presently contemplated that China will receive $30,000,000.23 The Embassy and the Department have not agreed as yet upon the method in which this money will be used, points of difference including (1) work relief programs, (2) the use of voluntary agencies, and (3) the degree to which U. S. assistance will be incorporated in the general Chinese rationing and distribution program. It is expected that decisions affecting these points will be reached in the very near future now that the Counselor, Mr. Butterworth,24 [Page 648]is in Washington. The $30,000,000 program will not result in China obtaining an increase in the supplies of foodstuffs subject to international allocation but rather is a means of making the foreign exchange available to China with which to effect these imports.
8.
With reference to the political situation in China, it was stated that country was 75% agrarian. The exchange had gone up to 44,000 to 1, when it used to be that one Chinese dollar was worth 33⅓¢. Inflation has hit the professors and the middle class the hardest. Most students come from this middle class; hence the student riots. Today imports to China are restricted to private business of long-established reputation (U. S.-British), while Government and quasi-Government organizations of the Kungsoong25 obtain special privileges for themselves.
9.
It was felt that the Generalissimo has lost some of his status with the people partly because he has had no recent contacts with them. Actually it is difficult to criticize the Gimo but easy to criticize the inefficiency and corruptness of those under him. Note that all governors of provinces are generals.
10.
A member of the Mission asked the State Department representatives to express succinctly the U. S. political and economic objectives in China. Mr. John Carter Vincent responded to the effect that our political objective envisaged a strong, unified, democratic China. When he was asked if China really could be a democracy in the near future, he indicated that it would require many years to so develop, but that the U. S. desired China to broaden the base of the government, including representatives from various political elements. When asked whether Communist elements should be included in the idea of broadening the base, he stated categorically that the Communists would not be included.
  1. Chief of the Division of Chinese Affairs.
  2. Granted in 1942; for correspondence, see Foreign Relations, 1942, China, pp. 419 ff.
  3. For correspondence concerning surplus property, see pp. 1242 ff.
  4. For correspondence on the Marshall Mission to China, see Foreign Relations, 1946, vols. ix and x .
  5. For correspondence concerning military aid to China, see pp. 785.
  6. Approved August 1, 1946; 60 Stat. 754. For correspondence regarding the Sino-American agreement of November 10, 1947, see pp. 1263 ff.
  7. Office of the Foreign Liquidation Commissioner.
  8. See telegram No. 1596, December 31, 8 p.m., to the Ambassador in China, p. 939.
  9. United Nations Relief and Rehabilitation Administration.
  10. For correspondence on this subject, see pp. 1293 ff.
  11. W. Walton Butterworth.
  12. H. H. Kung and T. V. Soong were former Chinese Ministers of Finance and heads of banks.