893.51/6–3048: Telegram

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

959. New York Times of June 27 contained despatch by Durdin18 date line Shanghai June 26 and headlined “Chinese inflation turns for worst; deterioration raises issue of how American aid can be effectively used.” After introductory description sharp break black market, [Page 630] story attempts describe policy issues involved disposal special account,19 substance of which is as follows:

Worse economic plight accentuates problem devise U. S. aid operations alleviate new conditions. “One school of thought here, shared by some planners in State Department” favors no current expenditures with proceeds sale aid goods. Felt that such expenditures to finance relief and construction projects merely increases inflation. Therefore argued that proceeds should be sterilized by turning them over Chinese treasury as substitute [for] money otherwise printed for regular expenditures. The other school [of] thought defends projects, such as those sponsored CRM,20 as benefit China and giving US some control supervision many aspects relief and rehabilitation. This school argues that amount currency printed probably not affected if proceeds sale aid goods released Chinese Treasury.

“Some proponents of the first line of action are pessimists on China aid who are skeptical that any decisive contribution toward saving the Chinese Government can be made by US assistance. These individuals would commit Americans to as little control of expenditures as possible and as little responsibility for what ultimately happens. Chinese negotiators are arguing for a minimum of American supervision and control and a minimum of specially directed projects.”

Sent Nanking as 959, repeated to Shanghai as 1178.

  1. Tillman Durdin.
  2. Established under article V of the Economic Aid Agreement between the United States and China, signed at Nanking, July 3, 1948, Department of State Treaties and Other International Act Series No. 1837, or 62 Stat. (pt. 3) 2945. For correspondence on negotiation of this Agreement, see pp. 506 ff.
  3. China Relief Mission (United States), which administered relief measures in China authorized under Public Law 84, approved May 31, 1947; 61 Stat. 125. For correspondence on negotiation of agreement with China under which such relief was administered, see Foreign Relations, 1947, vol. vii, pp. 1293 ff.