893.50 Recovery/7–2048

Memorandum of Telephone Conversation, by the Chief of the Division of Chinese Affairs (Sprouse)

Participants: Dr. Tan Shao-hwa, Chinese Minister
Mr. Sprouse, CA

During the course of a telephone conversation today, Minister Tan referred to the conversation that he had had with Mr. Butterworth [Page 115]in regard to the possibility of the United States Army going into procurement for the Chinese in connection with their expenditures of the $125 million grants, and to a similar conversation which he said Ambassador Koo had had with the Secretary of State. Minister Tan stated that he hoped that it would be possible within the framework of the China Aid Act and the powers of the President for the U. S. Army to procure military supplies for the Chinese. He also expressed the hope that it would be possible to purchase surplus stocks and that the question of priority for Chinese purchases would be favorably acted upon. Minister Tan said that, as had been indicated to him, it was chiefly a legal question with reference to whether the Army could be reimbursed for transfers of its stocks or whether the money would be returned to the Treasury Department.

In reply to his query regarding the status of this matter, I informed Minister Tan that this matter was being looked into and that every effort was being made to find some solution.