Pursuant to that request, we are forwarding as an enclosure to this
letter a memorandum in which is set forth the pertinent information,
obtained from the Government agencies concerned, regarding the sales and
transfers of U. S. surplus property to the Chinese Government.
It would be appreciated if this information could be communicated to
Senator Wiley and made a part of the official records of the Senate
Foreign Relations Committee.
[Enclosure]
Memorandum Prepared in the Department of
State
Sales and Transfers of U. S.
Surplus Property to the Chinese
Government
The underlying table lists the various contracts and agreements
between representatives of the U. S. Government and the Chinese
Government covering the sales and transfers of U. S. surplus and
excess stocks from 1945 to date and, where the information is
available, indicates the procurement cost and the sales price or
value of the stocks made available under each contract or agreement.
Details regarding these transactions, including the terms under
which these surplus stocks were sold or transferred to the Chinese
Government, are set forth immediately following the table in
paragraphs numbered to correspond with the numbers of the contracts
and agreements listed in the table.
It should be noted that the sales and transfers of U. S. surplus
property listed below are not included in the total of $1,436.9
million of grants and credits authorized for China since V–J Day,
which has been previously reported to the Congress. (See Appendix A,
pp. 18–19, of the House Foreign Affairs Committee print of “Text of
Proposed China Aid Bill and Background Information on Economic
Assistance Program for China”, February 20, 1948.) Moreover, parts
of the information indicated below represent a summary
recapitulation of that presented in Sections 9 to 11, pp. 26–30, of
the document under reference. It is not possible to draw up a total
for the surplus property transactions. In some cases the surplus
stocks are still in the process of being transferred and the full
value of the property will not be known until the transfers have
been completed.
[Page 36]
|
Date of Contract or
Agreement |
Type of
Surplus |
Procurement
Cost |
Sales Price or Value
Realized |
| 1. |
Nov. 29, 1945 |
U. S. Army Stocks in West
China |
n. a. |
$20,000,000* |
| 2. |
May 15, 1946 |
Dockyard Equipment |
n. a. |
4,000,000† |
| 3. |
Aug. 30, 1946 |
Civilian-type Surplus Property
in China, India and on 17 Pacific Islands |
$824,000,000 |
175,000,000 |
| 4. |
(Nov. 29, 1945
(July 15,
1947
(Feb. 18, 1948
(Feb. 27, 1948 |
Surplus Ship Sales by the
Maritime Commission |
77,300,000 |
26,200,000 |
| 5. |
June 25, 1947 |
Rifle Ammunition |
6,566,589 |
656,658 |
| 6. |
Oct. 1947 |
T. N. T. |
275,000 |
99,000 |
| 7. |
Nov. 6, 1947 |
Air Force Equipment |
9,449,850‡ |
935,312‡ |
| 8. |
Dec. 8, 1947 |
Naval Vessels |
70,589,298 |
(gift) |
| 9. |
Dec. 22, 1947 |
Transport Aircraft |
34,800,000 |
750,000 |
| 10. |
Jan. 7, 1948 |
Ammunition |
4,441,337 |
44,413 |
| 11. |
Jan. 30, 1948 |
Air Force Equipment |
25,292,365 |
4,426,163 |
| 12. |
Jan. 31, 1948 |
Air Force Equipment |
‡ |
‡ |
| 13. |
Mar. 17, 1948 |
Ammunition and other
Matériel |
n. a. |
n. a. |
1. On November 29, 1945 the U. S. Army, upon the occasion of its
withdrawal from west China, sold to the Chinese Government its
property in that area which consisted of a broad assortment of
expeditionary supplies. This property was sold for down payments of
CN$5,160,000,000 and US$5 million plus US$20 million to be paid
subsequently over time on terms to be agreed upon. The down payments
were made in the form of offsets against the United States Yuan
indebtedness to China, the US$5 million down payment having been one
of the considerations incorporated in the Surplus Property Sales
Agreement of August 30, 1946. As the west China sales was made under
pressure of departure, a detailed inventory of the property
transferred could not be made and there is no estimate available
regarding its procurement cost.
2. On May 15, 1946, the Foreign Liquidation Commissioner entered into
a contract with the Chinese Government providing generally for the
sale of surplus equipment for dockyards in Shanghai and Tsingtao.
The equipment sold was to be evidenced by schedules of property to
be attached as a part of the contract thereafter to be agreed upon.
Payment is to be in 30 annual installments or, alternatively, the
contract
[Page 37]
provides that the
U. S. should have the right at its option to demand of China goods
and services in the form of maintenance, repairs and operating
supplies for vessels of the U. S. Navy and U. S. Government,
provided such goods and services do not exceed 25% at any one time
of the capacity or facilities of the dockyards concerned. The most
recent information indicates that approximately $4 million (fair
sales value) of dockyard facilities and floating equipment has been
delivered under this contract. An estimate of the procurement cost
of these deliveries is not available at this time.
3. The Surplus Property Sales Agreement of August 30, 1946 between
OFLC and the Chinese Government transferred fixed installations in
China and movable property located in China and on 17 named Pacific
Islands. The property sold under this Agreement included every type
of supply used by an expeditionary force except combat matériel,
vessels and maritime equipment, and aircraft, all of which were
specifically excluded from the contract. Furthermore, the financial
settlement under the Agreement took into account a number of
miscellaneous sales contracts which had been negotiated
previously.
Original cost of the property sold under the Agreement, together with
that covered by miscellaneous sales contracts previously negotiated
and recognized in the Agreement, amounted to approximately $824
million, the realized return on which to the United States was $175
million which the Chinese Government agreed to arrange as follows:
(1) US$150 million offset against the United States wartime
indebtedness to China; (2) provision of a fund equivalent to US$20
million fund for research, cultural and educational activities in
China; and (3) the equivalent of US$35 million for acquisition of
property in China and for current governmental expenses. These items
total US $205 million, but the United States in turn agreed to
establish a fund of US$30 million to be used by China to cover the
cost of shipping and technical services arising out of the property
transfer.
Property sold under the Agreement itself had an estimated procurement
value of $584 million, the realized return on which was $101
million. The procurement cost of property sold under the
miscellaneous sales contracts recognized in the Agreement was
estimated at $240 million, the agreed-upon sales value having been
$74 million. (For further details see Appendix A, section 9, pp.
26–28, of the House Foreign Affairs Committee print of “Text of
Proposed China Aid Bill and Background Information on Economic
Assistance Program for China”, February 20, 1948.)
4. The Maritime Commission has sold or approved for sale to China a
total of 43 war-built surplus ships with a war-time procurement cost
of approximately $77.3 million, the sales price of which to China is
reported to be $26.2 million.
[Page 38]
Ten of these ships (N–3 types) were sold for cash on November 29,
1945. On February 20, 1946, the Export-Import Bank authorized
extension of a $4.2 million credit to cover 75 percent of the sales
price of these vessels plus the cost of their towing to China. This
credit has not yet been disbursed. The amount of this credit is
included in the $1,436.9 million of grants and credits authorized
for China since V–J Day as reported previously to the Congress.
The remaining 33 ships have been, or are being, sold on credit terms
as authorized by the Merchant Ship Sales Act of 1946 which requires
that 25 percent of the sales price be paid in cash. The balance of
the sales price of these 33 vessels (approximately $16.4 million) is
to be repaid in annual installments over the economic life of the
ships sold.
The following table provides comparative detailed data on the
transactions indicated above:
| Ships Sold or Approved for
Sale |
Date of Sales Contract or
Approval |
Wartime Procurement Cost |
Sales Price |
|
|
|
(In
millions of dollars) |
| 10 |
N–3 Ships |
Nov. 29, 1945 |
$13.4 |
$4.3 |
| 10 |
Liberties) |
July 15, 1947 |
28.0 |
9.3 |
| 8 |
N–3 Ships) |
|
|
|
| 8 |
C1–M–AV1 Ships) |
Feb. 18, 1948 |
28.4 |
10.0 |
| 4 |
C1–S–AY1 Ships) |
|
|
|
| 3 |
VC2–A–P2 Ships |
Feb. 27, 1948 |
7.5 |
2.6 |
| 43 |
|
|
$77.3 |
$26.2 |
5. A contract dated June 25, 1947, provided for the sale by OFLC of
130 million rounds of 7.92 (Generalissimo rifle) ammunition for
$656,658.90. The procurement cost of this ammunition was
$6,586,589.02. The sales price was paid in cash in U. S. dollars at
the time the contract was signed.
6. The War Assets Administration sold 1,100 short tons of T. N. T. to
the Chinese Government in October 1947 on cash terms for $99,000.
The procurement cost of this material was $275,000.
7. All surplus aircraft, Air Force property and property procured by
all other U. S. military branches, except combat matériel and
implements of war, located in the Pacific area and specifically
earmarked for the 8⅓ Group Chinese Air Force Program, were covered
by an OFLC basic contract signed November 6, 1947. This contract
includes the following types of property:
- (a)
- Commercial-type aircraft;
- (b)
- Air Force supplies for commercial-type aircraft and for
combat-type aircraft previously acquired by China under
Lend-Lease;
- (c)
- Common user items, such as clothing, et cetera.
The procurement cost of surplus stocks presently accepted by the
Chinese Government under this contract and under the supplemental
contract of January 31, 1948 is $9,449,850. The sales value of these
[Page 39]
stocks is $935,312. The
sales value, as stated under the terms of the contract, is all
aircraft at current Foreign Liquidation Commissioner’s world-wide
prices and remaining property at 12½ percent of the U. S.
procurement cost. The Chinese Government maintains a deposit in U.
S. dollars with the OFLC representatives at Shanghai against which
are charged the payments due at the time the items under this
contract are declared surplus and transferred to the Chinese
Government for removal. No removals are permitted unless the amount
of the deposit is sufficient to cover the cost of the items
involved.
8. Naval vessels transferred by the U. S. Navy to the Chinese
Government under Public Law 512, pursuant to an agreement between
the U. S. Government and the Chinese Government signed on December
8, 1947, were not sold under surplus arrangements but were
transferred as a gift. Ninety-six of these vessels had already been
transferred under Lend-Lease. These were recaptured “on paper” for
transfer under the agreement of December 8, 1947. The total invoiced
value of these 96 vessels, together with 2 additional vessels
transferred since that date, is $70,589,298.
9. The War Assets Administration sold 150 C–46 transport planes to
the Chinese Government on December 22, 1947 on cash terms for $5,000
per plane, or a total of $750,000. The procurement cost of these
planes was $34,800,000 (based on an average cost of $232,000 for
each plane).
10. An open-end contract between OFLC and the Chinese Government was
signed on January 7, 1948 covering ammunition and explosives located
in the Marianas separate and apart from the requirements of the
Chinese Air Force 8⅓ Group Program. The procurement cost of the
stocks presently accepted by the Chinese under this contract is
$4,441,337. The sales value is $44,413 or 1 percent of the
procurement cost.
11. All stocks in the United States, including Hawaii, available for
the Chinese Air Force 8⅓ Group Program (with the exception of combat
aircraft which are being made the subject of a separate contract)
were sold to the Chinese Government under an open-end OFLC contract
signed on January 30, 1948. Engine overhaul plant equipment located
in Hawaii, having a procurement cost of $1,360,898.50, was sold on
February 28, 1948, payment being made by the Chinese Government in
U. S. dollars on that date. The remaining equipment covered by the
contract will be sold in groups, under successive supplementary
sales agreements (schedules). Payment for the equipment covered by
each such sales agreement (schedule) will likewise be made in cash
U. S. dollars at the time of the signing thereof. The procurement
cost of all stocks thus made available is
[Page 40]
estimated at $25,292,365. The total sales price
can be estimated at 17½ per cent of procurement cost, or
$4,426,163.97.
12. A contract (supplementing that of November 6, 1947) was feigned
on January 31, 1948 covering the sale by OFLC of combat equipment in
the Pacific applicable to the Chinese Air Force 8⅓ Group Program.
Aircraft transferred under this contract are sold at current OFLC
world prices and all other items, except ammunition, are sold at 12½
per cent of the procurement cost. Ammunition under this contract is
sold at 1 per cent of the procurement cost. The procurement cost and
sales value of the stocks presently accepted by the Chinese under
this contract are included in the totals shown in paragraph 7 above.
Chinese payments under this contract are being handled in the same
manner as that provided for in the November 6, 1947 contract for Air
Force Equipment (see 7 above).
13. An open-end contract was signed on 16 March 1948 between OFLC and
the Chinese Government which will cover all available ammunition in
Hawaii suitable for Chinese needs and other available surplus
military stocks in the United States suitable for Chinese needs not
already covered by the contract of 30 January 1948. The sales value
of the stocks to be transferred under this contract is to be
established sale by sale. The ammunition covered under this contract
will be sold at either 5% or 10% of the procurement cost, depending
upon the caliber of ammunition. Of this ammunition, there have been
received by OFLC surplus property declarations to the amount of
$842,727.50 procurement cost. This has been offered to the Chinese
at a sales price of $81,247.34.
