893.50/3–1147
The Ambassador in China (Stuart) to the Secretary of State
[Received March 21.]
The Ambassador has the honor to refer to the Embassy’s plaintext telegram of February 16, 1947 (unnumbered),5 and nos. 2986 and 299 of February 17, 1947, containing the text of the Economic Emergency Measures and related rulings decreed February 17, 1947 by the Chinese Government, and to the Embassy’s telegram no. 300, February 17, 1947, giving brief comment on certain aspects of the Measures. Enclosed is a copy of the Regulations for the Enforcement of Measures Regarding the Provision of Daily Necessities,7 announced in Nanking on February 19, 1947, which are intended to implement one provision of the Economic Emergency Measures.
There appears below a discussion of the Economic Emergency Measures—in summary and then in detail—which evaluates them in relation to the history of similar measures in China and the degree of success which may be expected from them.
Summary
While some favorable results may materialize from the Economic Emergency Measures, they cannot, in the circumstances, achieve a lengthy stabilization. Some increase in revenues may be effected, the reduction in certain expenditures may be sizeable, and for a short time certain wages and prices may be stabilized. These, combined with the control over imports already introduced in the Revised Temporary Foreign Trade Regulations,8 are contributions toward a more stable economic and financial situation. But they are far from sufficient. The factors making for inflation in China today are sufficiently powerful to make it doubtful whether even the strictest, most conscientious, and thorough-going enforcement of the Economic Emergency Measures could succeed in controlling the situation. It is understood that henceforth the Government intends to employ large numbers of secret agents who shall apply whatever strong-arm methods [Page 1088] they may deem necessary to bring about compliance with the regulations of the Government. But it is feared that rather than bringing compliance, such steps will lead to resentment among the populace and increase the likelihood of physical disturbances representing protests against the conditions under which people are forced by circumstances to live. The demands made on the economy today are simply far greater than it can meet.
Considering, therefore, the realities and difficulties to be faced in implementing the Measures as outlined below—the lack of adequate and trained administrators, the insufficient wage of public servants, the enormous and continuing military expenditures, the disruption of internal distribution, and the time required to reap the results from the positive steps which might be taken to meet the situation—it is difficult to imagine how more than a short period of stabilization can be achieved. This in itself is a laudable accomplishment, especially if otherwise the existence of the Government and the internal urban economy might have been threatened. But no one is deluded that the stabilization will remain in effect for long. The Government has established for itself a slight breathing spell—partly because of the institution of drastic requirements which surely no one wishes immediately to circumvent, and partly because the Measures have a certain psychological value. End of Summary.
[Here follows detailed discussion of economic emergency measures.]