811.516 Export-Import Bank/11–1347
Memorandum of Conversation, by the Director of the Office of Far Eastern Affairs (Butterworth)
| Participants: | The Chinese Ambassador, Dr. Wellington Koo |
| The Secretary | |
| Mr. W. Walton Butterworth, FE |
The Chinese Ambassador called at his request at 10:45 a.m. and opened the conversation by referring to the reply which he had received from the Export-Import Bank under date of October 23rd [Page 1215] regarding the cotton credit. He indicated that since he requested this appointment to discuss this matter the situation had been changed by reason of the Secretary’s statement to Congress regarding assistance to China, for which he expressed appreciation and gratification. He went on to inquire whether the Chinese Government should reply to the Export-Import Bank’s letter, which he indicated was not, in the opinion of the Chinese Government, correct in certain aspects: in particular, the Chinese Government could use, and should obtain, in view of the importance of cotton cloth in meeting the inflationary situation, more cotton before mid–1948, and secondly, the reference to the $20,000,000 allocation by the Chinese Government for benefits in the third quarter of this year was also not wholly correct. The Secretary explained to Dr. Koo in confidence that it might be that Congress would find means of relieving the Export-Import Bank of the burden imposed on it by the rigidity of its legislative charter which might result in some favorable action on projects which could not be justified on a matter-of-fact business basis. At the Secretary’s suggestion, I pointed out that it was desirable for the Chinese Government to answer as fully as possible the Export-Import Bank’s query, having also in mind the fact that the Bank desired to make a cotton credit on terms shorter than the four years proposed by the Chinese, and to include therein provisions for export of fairly substantial quantities of cotton cloth. The Ambassador indicated that he would communicate the above to his Government.
Dr. Koo passed on from there to the proposals for assistance to China, the details of which he wished to obtain in so far as possible. The Secretary explained to him the tentative stage at which this matter was and took this opportunity to point out the present wave of sentiment in favor of aid to China would not run very far and it was to be expected that countercurrents would set in. In this connection, he cited Congressman Judd’s attempts to act as public advocate for full assistance to China and indicated that they might well contribute to these counterforces. The Secretary pointed out that if he had replied flatly to Congressman Judd’s questions64 he would have been forced to give answers which could be used by the Chinese Communists and others against the Chinese Government. The Secretary recounted at some length the extent to which the leadership of the National Government armies and inadequate training of recruits as replacements for existing divisions were responsible for the parlous state of the military situation in China despite the amount of American military and other supplies. The Ambassador offered [Page 1216] to report General Marshall’s views direct to the Generalissimo, whereupon the latter [Marshall] recounted to him at some length how often he had impressed these basic facts on the Generalissimo, the Minister of War, the Chief of Staff and others, and how politely they had listened and how little, if anything, they had done. In this connection, the Secretary cited the recent authorization65 for participation in the training center in Formosa and indicated his expectation that it would do little or no good since a division thus trained would not be able to obtain trained replacements since no attempt was made to create these replacements and he went on to describe the monumental effort the United States had made to supply such replacements to its own army and the essential part that the replacement effort had played in the victory.
The Ambassador also inquired about ammunition and referred to the communications which Dr. Tan had recently handed me.66 The Secretary told him that the question of making available ammunition in the Pacific had formed the subject of a communication to General MacArthur67 and that it was hoped as soon as it was ascertained what types and quantities were available that it might be possible to work out some arrangement.
The Ambassador also made reference to the 350 C–46’s, indicating that members of his staff who were leaving for Georgia, Arkansas and California today had expressed some apprehension that a sufficient quantity of good planes would not be available. The Secretary pointed out that he had impressed upon the Foreign Minister the need for speedy action and that he had had 50 of the best C–46’s earmarked in Arkansas for China’s needs. The Ambassador expressed appreciation and stated that they had obtained from War Assets [Administration] the name of an American firm with whom they might contract to service and deliver the planes in China. I suggested to the Ambassador that it might be well to have two or more firms bid for the work. Dr. Koo thereupon made noises which I took to indicate that whereas the Chinese Government would be willing to pay the American firm or firms, it would like to get the planes on credit, and I explained that the War Assets procedure was fixed by law and that the intervention of the State Department had been to facilitate the sale at the very reasonable figure of some $5,000 apiece.
The Ambassador then renewed his questionings regarding the assistance to China with a view to ascertaining whether it would be possible [Page 1217] to have China included in the emergency program with Italy, France and Austria. He had previously mentioned the April 1st date. The Secretary had explained to him the time schedule and that assistance to the above-mentioned three countries was to cover the period through March. The Secretary suggested that he pursue this matter further with me. After we left the Secretary’s office, he specifically asked whether the $60,000,000 which had been mentioned in the Congressional hearings68 could not be put into the emergency request of Congress and appropriated at this special session. I explained to him that the emergency request had been limited to the bare minimum and for uncontroversial and ultra-emergency requirements and that the Chinese position was viewed as being more akin to that of Britain or Holland than to the emergency situation of Italy, France and Austria. In the end the Ambassador said that he assumed the Department of State would have no objection if Congress lifted the $60,000,000 into the immediate appropriation, to which I replied that the State Department had very little experience of the Congress embarrassing us with unasked for appropriations.
- Presumably questions asked by the Congressman at hearings before the House Committee on Foreign Affairs, November 12, 1947; see Emergency Foreign Aid, p. 22.↩
- See telegram No. 1302, October 24, 5 p.m., to the Ambassador in China, p. 901.↩
- See memorandum from the Chinese Embassy, November 4, p. 913.↩
- General of the Army Douglas MacArthur, Supreme Commander for the Allied Powers, Japan.↩
- November 11, 1947: see Interim Aid for Europe: Hearings before the Senate Committee on Foreign Relations, 80th Cong., 1st sess., p. 43.↩