893.50 Recovery/4–2748: Telegram

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

640. Pei Tsu-yi and Paul Chu40 left here by air April 24 and believed scheduled arrive Shanghai April 28 Washington time. Rest of Technical Mission remaining here temporarily, Kan Lee in charge. Just before Pei’s departure, Dept presented him informally topical list points relating Bilateral Agreement and implementation aid program not heretofore discussed Chinese in order that he may discuss them informally with Chinese Govt. Dept stated these points represent matters of concern to U. S. Govt but did not take firm position re their substantive contents, and indicated list not necessarily exhaustive. Brief discussion was held on several points to indicate character Dept’s thinking. Following is topical list presented Pei and résumé discussion.

Bilateral Agreement on China Aid Program should include articles on following matters:
Preamble stating purposes of program. Discussion: This can be based upon language of Section 402 of Act.
Statement of authority under which U. S. will provide aid. Discussion: This could be a general section which makes reference to the clearly applicable provisions of Title I, with particular reference to Sections governing procurement.
A statement of the terms of distribution and pricing. Discussion: This should establish principles for operation within China, rather than detail methods distribution. Of particular importance is principle of joint determination by Chinese and U. S. Governments.
Setting up and management of special local currency account. Discussion: This should be general statement of procedure and of purposes for which account may be used. It should also incorporate principle of joint determination. Section 115(b) (6) provides a guide for the use of such account.
Undertakings by the Govt of China with respect to:
Promotion of industrial and agricultural production (Section 115 (b) (1)).
Measures which will assist in financial stabilization (Section 115(b) (2)).
Effective and practical use of all resources, including private foreign assets (115(b) (4)).
Facilitation of U. S. stockpiling activities (115 (b) (5) and (9)).
Furnishing reports and publication of information on program (115(b) (7 & 8)).
Taking all possible steps for practical implementation of Chang Chun’s January 28 statement and incorporation of such statement into agreement by reference.
Discussion under 5: Dept pointed out that language of certain undertakings, particularly (a), (b), and (c), might be different from that in Act to take account of special circumstances in China. Regarding 5(c), Pei stated that control of private foreign assets has concerned Chinese Govt for some time but that effective action requires cooperation of U. S. in obtaining info re individual holdings. Pei was told that recent decision now makes possible for U. S. Govt to cooperate with European Govts re release blocked holdings their nationals but that such action not possible for China because Chinese assets unblocked. For your info, it may be desirable that this article include reference foreign exchange assets within China in order to emphasize self-help aspects mobilization such assets. Chinese should not be encouraged anticipate U. S. Govt assistance obtain control assets in U. S. Kan Lee raised strong objection, seconded by Pei, to incorporation Chang Chun’s statement [in] Bilateral Agreement on ground this would make it appear to Chinese that Chang Chun’s statement had been required by U. S. as quid pro quo for aid. Lee stated this objection should not be construed as reluctance implement Chang Chun’s statement, and that he had no objection consideration points Chang Chun’s statement on individual merits for possible incorporation agreement. Dept called attention reference Chang Chun’s statement in Senate Committee’s report,41 and emphasized strong feeling Congress, Executive Branch, and American public that U. S. aid to China, as for Europe, is predicated on vigorous self-help program, [Page 512] with respect to which particular undertakings should be incorporated Bilateral Agreement.
Improvement of commercial relations with China (Section 405).
Arbitration clause (Section 115(b) (10)).
ECA Mission and Chinese Government arrangement for liaison with it. Discussion: Dept observed that it. appears preferable to follow pattern USFRP in coordinating existing Chinese Govt functions rather than establish special operating agency as in UNRRA-CNRRA42 pattern. Chinese Govt liaison should be at high-level with maximum authority.
Other points for early consideration:
Procedure for initiating work on reconstruction projects. Discussion: Dept stated that detailed plans for high priority projects should be drawn up as rapidly as possible. It is hoped that small group of economists and engineers can be sent China shortly as advance echelon ECA mission to assist Chinese in this work. Each project should receive separate documentation which could be presented Administrator as basis his approval and allocation funds. Important that Chinese coordinate various governmental agencies concerned reconstruction.
Formation of Joint Commission on Rural Reconstruction in China. Discussion: Dept stated importance preliminary planning this work indicates desirability separate agreement on Joint Commission be concluded prior signing general Bilateral Agreement. Prompt attention should be devoted scope program and selection Commissioners. Dept stated program should include projects to implement recommendations Sino-American Agricultural Mission43 and possible rural industrial projects, as well as Yen’s program for mass education.

Above may be of assistance Embassy if approached informally by Chinese following Pei’s arrival. Dept would appreciate Embassy’s comments these matters and will forward promptly further details in course developments here.

  1. Member of the Chinese Technical Mission in Washington.
  2. Senate Report No. 1026, 80th Cong., 2d sess., p. 12.
  3. United Nations Relief and Rehabilitation Administration and Chinese National Relief and Rehabilitation Administration.
  4. For correspondence on this subject, see Foreign Relations, 1946, vol. x, pp 1268 ff.