893.50 Recovery/8–1648
The Acting Secretary of State to the Secretary of Defense (Forrestal)
Dear Mr. Secretary: Reference is made to Secretary Marshall’s letter to you of August 13, 1948 and your reply thereto of August 16, 194823 with regard to the possible diversion to General Fu Tso-yi of military equipment obtained by the Chinese Government under the $125 million grants. Reference is also made to the memorandum of the Joint Chiefs of Staff dated September 9, 194824 approving the recommendation that military supplies destined for north China and [Page 179] Shantung be shipped to Admiral Badger in Tsingtao in otherwise empty Navy bottoms without charge to the Chinese.
I understand that the Department of the Army is now in possession of information with regard to the proposed distribution of the military supplies and equipment which are being procured in response to the Chinese request that $38 million be transferred to U. S. Army funds for the purchase of materiel to be shipped to Tsingtao. This information is to the effect that, in contrast to the original understanding that these supplies would be distributed solely in north China and Shantung, the Chinese have now indicated that the supplies will be apportioned as follows: 30 per cent to Tientsin, 10 per cent to Tsingtao and 60 per cent to Shanghai.
This report is very disturbing to this Department and, if correct, would appear to constitute a vitiation of Admiral Badger’s proposal which was concurred in by Secretary Marshall and agreed to by the Joint Chiefs of Staff. As you will recall, the proposal that this matériel be shipped to Tsingtao in U. S. Naval vessels was made in an effort to encourage the Chinese to allot an equitable share of purchases under the $125 million grants to north China where it was felt that the need was most urgent and the matériel would be used to best advantage. I feel sure that General Barr, Admiral Badger, and your other military advisers in China would likewise be disturbed over this apparent volte face on the part of the Chinese with regard to the question of furnishing military assistance to Fu Tso-yi.
If, therefore, the information proves to be correct that the Chinese intend to allot 60 per cent of the $38 million purchases to the Shanghai area, it is recommended that General Barr be instructed to discuss the question with the Generalissimo and urge that a reconsideration be made with a view to assuring that a more suitable proportion of this matériel reaches Fu Tso-yi. In this connection it might be pertinent to note that the original plan of shipping this matériel to Tsingtao in U. S. Naval vessels at no cost to the Chinese was predicated upon the understanding that the entire amount of the matériel would be distributed in the north China area. Moreover, the recent capture of Tsinan by the Communists has, in my opinion, only served to emphasize the critical need existing in north China for a sufficient supply of arms and ammunition with which General Fu Tso-yi can make a determined stand in the strategic Tientsin–Peiping–Kalgan corridor.
I should appreciate receiving your comment on the above-outlined suggestions.
Very sincerely yours,