893.00/2–1648: Telegram

The Secretary of State to the Ambassador in China ( Stuart )

251. [For] Amb and Clark. It now appears probable China aid proposals will be transmitted to Congress by President Feb 18. Following info re program is not to be communicated to any Chinese until receipt further instructions.

Program calls for authorization $570 million thru Jun 1949. It is contemplated that $510 million would be used to finance imports of foodstuffs, cotton, petroleum products, fertilizer, tobacco, pharmaceuticals, coal, metals and repair and replacement parts for existing industry, and $60 million would be available to purchase capital goods for key reconstruction projects.

Proposed legislation states as its purpose provision of immediate aid to China to relieve human suffering, to assist in retarding economic deterioration, and to afford the people of China an opportunity to initiate measures of self-help necessary to rebuild the bases for more stable economic conditions. President would be authorized to provide aid on either a grant or credit basis, but it is believed situation requires bulk of funds be granted.

Draft bill calls for an agreement between China and the US containing undertakings by China along lines somewhat similar to those followed in USFRP54 and European interim aid agreements and those considered for ERP. It is proposed that program would be [Page 474] administered initially by Dept thru USFRP Mission, but that control may be transferred to such general foreign economic aid administration as Congress creates.

Requested legislation would permit use of funds for approved goods delivered in China after date of enactment. Thus program may have some retroactive effect. Procedures required for such operation being discussed Chinese Technical Mission but assurance cannot be given that any Chinese orders made prior to passage Bill will be paid for with aid funds. Draft bill authorizes advance of $150 million by RFC55 pending appropriation funds.

For your info, if after you have been authorized to communicate above to him Gimo inquires whether program provides funds for currency stabilization suggest you comment that we do not believe present conditions in China make it possible to use US aid effectively in currency stabilization; however that goods provided under program and Chinese currency proceeds of such imports should help to retard rate of price increase.56

  1. United States Foreign Relief Program.
  2. Reconstruction Finance Corporation.
  3. The Department, in telegram No. 263, February 17, 5 p.m., instructed the Embassy to communicate the substance of this message to President Chiang Kai-shek (840.50 Recovery/2–1748).