893.50 Recovery/7–2048: Telegram

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

1323. Embassy shares Dept belief (refDeptel 1003, July 8) that major emphasis disposition of special account should be on sterilization as being direct and effective attack at inflation root. As Embassy has stated before, however, there are many meritorious CNC-financed former CRM projects which it would be a mistake to discontinue. Admittedly line is difficult to draw. Embassy believes criteria for support such projects should be higher than under CRM. Given difference in magnitude ECA and USFRP funds, Embassy believes most deserving and from US point of view politically, most valuable projects could be continued under ECA employing only fraction of special accounts total. Phrase in reftel “official Chinese Govt circles” believed by Embassy in large part to consist of provincial and municipal officials in whose jurisdictions projects have been supported for which they have been deeply grateful. Projects such as emergency refugee relief and dyke reconstruction have generated gratitude and good will toward US on part submerged classes.

Reference (c) reftel, selected medical and volunteer agency assistance admittedly contains dangerous long run implications in view temporary nature such support. Embassy believes ECA here aware such implications and still in process formulating its recommendations.

Sent Department 1323, repeated Shanghai 637.