711.93/3–2647
The Ambassador in China ( Stuart ) to the Secretary of State
[Received April 8.]
Sir: I have the honor to offer a few suggestions as to possible American aid to the present Government of China when or if conditions within this country seem to make this advisable. It is assumed that there must be at least two prerequisites. One is that the Government cease all aggressive military operations against the Communist Party and the other that it be sufficiently reorganized to encourage the hope of drastic reforms and of progress toward the establishment of genuinely democratic institutions.
[Page 85]The Civil War took a new turn when the Communist Party toward the end of last year insisted on their two impracticable conditions and began military and other attacks in the expectation that the Government would within a few months be so weakened that they could then resume the peace talks on terms more favorable to themselves. Up to that time they gave real indications of wanting the fighting to cease, but since then they have repeatedly taken the offensive. This, with the rapidly worsening financial and economic situation, compelled the Government either to succumb or to avert the threatened collapse by strong measures. There can be no economic recovery until trunk-line railway operation can be restored. The Government estimates that this will require about three months. Even if this forecast proves correct, following this will the Communist Party then be willing to reopen negotiations, how long the Government can maintain the struggle in view of exhaustion of military equipment, fiscal problems, increasing popular discontent, etc., are questions that cannot now be answered.
At this writing Government reorganization is still undecided. The C. E. C. adjourned on the evening of March 24. Whatever the final outcome, President Chiang will emerge as more than ever the predominant figure. Through all of the incessant bickering and bargaining, the personal and partisan jealousies or ambitions, he has been himself unassailed while maneuvering to achieve a workable solution. It is, in my opinion, not so much that he is or strives to be a dictator in the accepted sense as that he is the only personality whom the others all respect and around whom they can rally. It still remains true that whatever policy he really wants can be put into effect and that therefore by winning his approval for constructive reforms these can most effectively be carried out. There is no other person or group who could be counted on to maintain the solidarity of the Kuomintang or to integrate this with minority parties. With all of his shortcomings he sincerely seeks the welfare of his country according to democratic principles. In accomplishing this he desires the utmost cooperation with the United States. There may be developments before long which will justify substantial aid to the Chinese Government. It may be worthwhile, therefore, to be considering in advance some of the forms which this might take.
Military Reorganization. Every other problem in China touches sooner or later on this one. Without drastic reduction of military expenditure there can be no balanced budget nor any adequate funds released for constructive improvements. All civilian administrative reforms, railway and other public utilities, parliamentary procedure, etc., are in danger of interference from irresponsible and too often not highly intelligent military officers. More positively, a relatively [Page 86] small force, well-trained and equipped, with sufficient food, clothing, medical care and pay, with facilities for rapid mobility, should be able to suppress banditry of [or?] other local outbreaks and resist border disturbances. Younger, modern trained officers and the enlisted men could alike be indoctrinated with an entirely new conception of their function and inspired with corresponding patriotic and professional ideals. But to carry out such a reorganization American training personnel would be essential. This would also be the surest protection to the Communist Party whose troops should be absorbed into the National Army.43 The American Army Advisory Group program is comprehensive and no doubt admirably planned but unless there can be political stability in the near future the fine start already made will be wasted. With this strengthened, however, by American-directed army reorganization, the training of future officers ought to contribute largely to peace within China and elsewhere. Major General John P. Lucas, Chief of the Army Advisory Group, seems to have in mind the integration of the training of military, naval and aviation officers in a single academy located at Peiping.
If within the next few months there is conclusive evidence of progressive reforms in the Government, and of the futility of further Communist armed resistance, it is conceivable that the Chinese Government might with the concurrence of ours make a proposal to the Communist Party leaders that they cease what can be merely disruptive guerilla activities and either join the new coalition government until the inauguration of the Constitution next December or become at once a recognized political party with full rights and protection. Certain areas might be temporarily reserved for their local administration pending the establishment of real popular suffrage. The American control of military reorganization should be an ample guarantee. If they refuse such an offer—whatever the real or declared reasons—their armed forces and all those discovered in acts of sabotage might be treated as disturbers of peace and order and obstructors of economic recovery. Any such undertaking should be accompanied by a standing invitation to all Communist Party members and fighting units to retract their former allegiance together with full publicity explaining the motives and appealing to all public-spirited citizens to give their loyal support.
Railroads. There is enclosed a detailed statement44 of what amount would be required to rehabilitate the railway lines in Government-controlled territory with certain extensions. This has been furnished at my request by Colonel E. C. Bailey, an American adviser in the Ministry of Communications. The loans ought to be very specific as [Page 87] to the particular line, the expenditures for equipment and other needs, etc., and the agreements should include an adequate number of qualified American advisers and auditors.
Currency Stabilization. This might be best achieved at the appropriate time with the cooperation of the International Bank.
Productive Development. This is of course vital to the national economy. The Export-Import Bank might be encouraged to aid on a specific project basis in financing private or semi-private enterprises, as well as governmental ones, on the guiding principles already worked out. American participation, at any rate in the initial stages, will make for honesty and efficiency and will in general be welcomed.
Educational Loans. For a more far-seeing and fundamental program of assistance to China these will be very beneficial. The destruction of educational plants and equipment during the war years has been tragically extensive and the Government can do but little in the immediate future to restore these. The present Minister for Education has talked to me of the seriousness of this problem and I feel the full force of his appeal. The direct and indirect benefits of such aid as is provided for in the Surplus Property Agreement,45 which, however, has the disadvantage of not providing needed US dollars, and the potentialities of the impressionable and intelligent Chinese youth both for constructive usefulness and for dangerously radical activities are sufficiently obvious.
Formosa. The maladministration of this island during the eighteen months since the Central Government took it over from Japan can scarcely be exaggerated. The only hopeful signs are the determined resistance of the islanders and the widespread criticisms of the Governor-General and his associates. At this writing the issue has become a sordid struggle between the C-C and the Political Science Cliques to which latter the Governor-General belongs. The danger is that a somewhat better military officer will be appointed and a series of partial reforms be approved without thorough-going improvement. It will be disastrous if through further ineptitude or misrule the disillusioned islanders continue more or less in a state of insurrection and the enormous economic potentialities are dissipated. The annual overseas trade under the Japanese was valued as high as US$225,000,000. One possibility might be to have it treated as a special economic area and employ a group of American or other foreign advisers to aid in developing its natural resources. This could perhaps be worked out either before or as a part of the Peace Treaty with Japan. While ostensibly for economic advantages, the goodwill of the local population and the realization of enlightened democratic [Page 88] principles adapted to the historical circumstances could be secured as essential factors. American loans might be guaranteed or liquidated in part at least through this procedure. If tactfully planned so as not to offend the sensibilities either of the National Government leaders and their public or that of the islanders it is not at all unlikely that both groups would welcome some such solution.46
The above suggestions are all intended as tentative and preliminary. If approved in principle you may feel it desirable to have them presented in more detailed form.
Respectfully yours,
- The Assistant Chief of the Division of Chinese Affairs (Rice) commented on this: “I doubt that the CCP would admit this.”↩
- Not printed.↩
- Signed at Shanghai, August 30, 1946; Department of State Publication 2655: Report to Congress on Foreign Surplus Disposal, October 1946, pp. 40–45.↩
- See memorandum of April 28 by Mr. Melville H. Walker, p. 460.↩