Memorandum by the Chairman of the Chinese Supply Commission (Wang) to the Secretary of State

The present economic situation in China is not beyond recovery if effective action is taken now showing confidence and constructive steps by the United States. The following action is recommended.

An emergency commodity credit of $200,000,000 would permit China to import essential cotton, wheat, fertilizers and other raw materials needed to control the inflation in commodity prices and revive domestic production. This credit might be granted out of the $500,000,000 now earmarked for China by the Export-Import Bank.
Also from the earmarked funds action should be taken at full speed to help restore the basic facilities and services necessary to a functioning economy, particularly transportation.
Projects such as rehabilitation of railways, harbors, public utilities and coal mines prepared by competent American engineering firms after surveys on the spot should be considered favorably by the bank now.
In clearing these projects the spirit of flexibility and cooperation now being extended to France should be accorded to China. The French simply buy useful things within certain broad categories and send the bill to the Bank for reimbursement.
Projects for the full available amount of the credit should be approved before June 30, 1947, the present date when the Bank has informally indicated it intends to take this money from China and use it elsewhere.
Favorable action should be taken on the Chinese request of May 27, 1946, to purchase from the Maritime Commission the vessels necessary for China’s domestic and foreign commerce. China has $5,500,-000 on deposit with the Maritime Commission which would entitle it under the Ship Sales Act83 to purchase more than forty ships, but none has been made available in spite of repeated approvals by the National Advisory Council and you. In the meantime, substantial numbers of ships have been sold to France, Argentina and Italy.
There are many other problems in Washington affecting China’s economy, such as reparations, Sino-Japanese economic matters, and Pacific surplus,84 expedition of which will aid China with no further burden to the United States. Many operational problems can be expedited if they receive broadminded review and frequent attention by some designated assistant on your staff.
Early announcement of a positive policy should halt panic and recover the ground recently lost by China. The Chinese Government can then reinstate effective control of the prices of textiles, rice, and [Page 1070] utility services. Importation of commodities will prevent impending civil service and industrial disorganization and unemployment. Stabilization of industrial wages can be attempted, and export trade stimulated.

In answer to the pessimistic view that nothing can be done so long as there is civil strife, it should be pointed out that a huge region of China is not affected by civil strife. Support and improvement of the economy of this unaffected region is the only alternative to taking the risk of abandoning China to the fate of a state disorganized through economic or monetary collapse in its large cities.

  1. Approved March 8, 1946; 60 Stat. 41.
  2. For correspondence on the problems of implementing the Surplus Property Agreement of August 30, 1946, see pp. 1242 ff.