893.24 FLC/12–1047
Memorandum of Conversation, by the Chief of the Division of Chinese Affairs (Ringwalt)
Dr. Tan called this afternoon at my request to discuss the latest developments in the negotiations for the purchase by the Chinese Government of surpluses in the Zone of the Interior destined for the 8⅓ Group Program.
[Page 926]I informed Dr. Tan that I had just learned from Colonel Kingman of FLC that the Chinese negotiators in Washington had made a counteroffer to the original FLC offer of 30¢ on the dollar for the material now earmarked under this program and that this counteroffer was 17% of procurement cost, 20% in cash and the balance over a period of five to eight years. I said that this surprised us no little, as we confidentially informed them the lowest price we could possibly accept was 17½% all cash. I reminded him that in obtaining this advantageous price we had exerted considerable pressure on FLC and because of commitments to other countries 17½% is the minimum possible. I said that after consultation with Mr. Butterworth I was compelled to make clear to him that the failure of the Chinese Government to act promptly in concluding this advantageous arrangement would inevitably be interpreted as an indication that the Chinese profession of the urgency of their need for military equipment generally had been given too much emphasis and would therefore serve to delay the conclusion of other arrangements for supplying war material to the Chinese Government.
Dr. Tan professed considerable surprise that we should feel so strongly on this subject and said that he could not understand why any alleged dilatoriness on the part of the Chinese in this connection might in any way hinder the speedy transfer to China of surplus munitions in the Pacific.
I replied that the 8⅓ Group Program had been worked out only after long and tedious discussions with the various Government agencies concerned and that we were most anxious to conclude the deal on the terms indicated as soon as possible. I added that we were anxious to take up the various programs seriatim and that on the conclusion of this program we would then be more free to act promptly on other contemplated programs. I reminded him that Secretary Marshall had been much interested in this particular program and had directed us to expedite the transfer of the material as much as possible.
I took the opportunity of Dr. Tan’s presence to point out to him that such little information as we had received through Army Department channels would indicate that the supply of surplus ammunition in the Pacific would prove to be disappointingly meager. I added that, judging from what I learned from offices in the Department of the Army, it might take several weeks yet before we had sufficient information on which to base a contract for sale through Surplus Property channels. I indicated that from what I could gather from friends in the Department of the Army who are working on this problem the supply of ammunition suitable for Chinese use might not exceed 10,000 tons. I said that Mr. Butterworth had asked me [Page 927] to inform him that he, with much regret, would like to suggest to the Chinese that they reopen the negotiations with Olin Industries, taking advantage of the arrangement previously outlined and recommended by Mr. Butterworth to the Chinese Foreign Minister during the course of their conversation last October 21.5