893.50 Recovery/11–2648: Telegram

The Chief of the ECA China Mission (Lapham) to the ECA Administrator (Hoffman)

Toeca 499. Supplementing Toeca 452.82 Because possibility consideration may be given discontinuing procurement and shipment commodities particularly food to areas now aided by ECA and to extent that Nationalist Govt loses control of such areas we make following comments. Emphasize our evaluations based from point of view our front-line operations China. Questions relating industrial reconstruction replacement program involve somewhat different issues than commodity program and will be commented on later in separate cable.

One cannot fail to be impressed with general effectiveness of Communist propaganda line to effect that aims of US in China are purely imperialistic, and that US has no real interest in welfare of Chinese people. This line is especially effective in country whose people quite naturally desperately weary of war. With many literate non-Communist Chinese, US aid has become increasingly blamed as enabling Govt, which has lost confidence of majority its people, to continue civil war which has become increasingly unpopular with each Communist victory.
Political interpretation to us by Embassy members suggest it unlikely that Govt of China will change hands through constitutional processes. To our knowledge there is little evidence President83 will voluntarily accept Communist terms for reorganization govt along lines inclusive his resignation and construction of Cabinet with Communist members. Nor does it seem probable that there will be coup d’état by influential members present Govt, which would overthrow Generalissimo and bring forth non-Communist central govt of sufficient power and prestige to command widespread support for continuation struggle. Rather it would appear that Generalissimo will attempt last ditch stand, that non-Communist fragments may long remain in some areas, and a new govt either wholly Communist or inclusive non-Communist members will soon control most of China. Anything may happen. But probabilities are that in coastal cities other than possibly Canton and Tsingtao we may very soon be confronted with Communist or Communist coalition accession to power outside the constitution of Republic. North China under Fu Tso-yi may be temporary exception.
If this forecast proves correct, ECA will be confronted abruptly with certain choices. Shall it:
Complete present commodity program subject to minimum of conditions, including publicity as to source of supplies granted Chinese people, freedom of activity to ECA personnel, and cooperation in completion present distribution arrangements?
Carry out policy (a) only to extent of permitting distribution foodstuffs and other commodities already landed or en route to China?
Cancel or divert all future shipments including those en route China, while turning over to local authorities goods already landed, or
Carry out policy (c) and also attempt to reclaim physical possession goods already in China?
Policy outlined in 3 (a) above will be most positive evidence to people China that aid program is in fact more than program economic warfare with sole purpose halting iron curtain. It would be in tradition of original Marshall Plan84 premised upon importance to US and world of aiding necessary economic recovery of peoples, and which consequently was offered to countries irrespective ideologies. It would be most effective counterpropaganda US could employ in China. It must be remembered that most Chinese people will not have selected Communist or part Communist govt by their own choice, but through force of arms; and many who joined Communist ranks did so from dislike present Govt, not from love of communism. Important to remember there will remain in China able and influential persons and groups who do not support international communism subservient Moscow; in fact many do not favor even national socialism. Competent analysts generally agree that Communist control initially can only be superficial in newly acquired areas, and that future ability of communism especially international communism to dominate China will depend among other things on will of non-Communist groups and persons to resist. Immediate adoption such policy as 3 (d) might prevent maintenance contact these groups and seriously undermine will to resist. These are major factors support policy 3 (a).
Against policy 3 (a) it would seem from here that three considerations are important. First that abrupt cancellation all assistance would, by increasing initial difficulties Communist rule in coastal cities, immediately impress on people the importance overthrowing such rule and turning again to western alignment. This argument does not appeal to us here. Combined influence in competent national government administration and unavoidable burdens of civil war have been so great that weakness Communist or coalition control [Page 656] would not immediately be demonstrated to people. It seems likely that end civil war may quickly bring an improvement in people’s temporary status. Must be admitted, however, that new Government would have easier immediate situation coastal cities if ECA supplies continued to April 3. Second consideration that weighs against policy 3 (a) is that willingness ECA continue assistance under current appropriation may weaken will of non-Communist Governments western Europe to resist coalition efforts those countries. From distance we doubt this. In western Europe ECA has not generally been confronted with civil war; it presumably has used threat discontinuance aid as means persuading European countries not voluntarily to establish coalition or Communist Governments. In China decision will have been made not by free choice but by force of arms in situation where position established Government will have been lost through incompetence and unwillingness to make necessary reforms. Third, may be argued that ECA continuance food and/or other commodity program under present legislation will backfire if US then refuses aid beyond current appropriation. Merit this objection depends primarily character US strategy. If new Government accepted conditions of present bilateral, which in fact incorporates general US foreign economic policy, result would be breach in Moscow policy which has deprived satellites of Marshall Plan aid and would greatly strengthen western influences China. If new Government refuses these customary stipulations, onus would be on it, not on US. If US refuses additional appropriation, result would remain better than adoption of 3 (b), (c), or (d); it could be stated publicly that takeover record of Communists in coalition governments throughout world made US unable continue aid, that aid program had been deliberately one year only and completion commodity or food aspects that program had been only for emergency aid Chinese people.
Policy 3 (d) above is opposite extreme from 3 (a). In US such policy may be politically advantageous in that it would emphasize ECA unwillingness have any truck with Communist or semi-Communist Governments. In western Europe it would emphasize importance maintaining completely non-Communist position if American aid is to be secured. In China and world, however, it would be most convincing proof Communist propaganda line that American assistance motivated solely by political and military considerations. That line is simply not true as will be recognized by all those aware of complex considerations that have led US to advance various types foreign assistance during postwar period.
In any event policy 3 (d) faces great practical difficulties in China. If ECA obtains title to aid commodities already landed and [Page 657] attempts enforce title against desperate needs for food and fuel it can hardly be expected that new Government would let US get away with it. If ECA goods were seized regardless of title Communist or coalition government would receive popular credit while US would be labelled effectively as in no sense interested people’s welfare.
Policies 3 (b) and 3 (c) above represent compromise solutions and merits can be inferred from evaluation of 3 (a) and (d). Policy 3 (b) represents least could be done and still maintain modicum of popular Chinese respect for American motives, (c) Would be regarded as niggardly policy and might well be interpreted merely American recognition practical inability to retain control aid commodities already landed this country. Policy 3 (b) therefore superior.
You will have guessed which above policies I hope will be adopted unless there are strong considerations in terms either ECA policy western Europe or with Congress that you believe override factors that seem so important here. Policy 3 (a) represents my considered opinion of what is in best interest American foreign policy China and my opinion is shared by principal members mission as well as, I believe, by Ambassador.
If statutory reasons appear to make such policy difficult, hope you will have legal interpretation rechecked and if necessary carry matter to President and such members Congress as you may deem appropriate. Tentatively believed here that while bilateral is only with recognized Government, it might well be possible quickly to arrive at limited understanding with local authorities or new Government which might lawfully be regarded under emergency conditions as substitute or supplement to existing bilateral. Existing bilateral could continue in effect to extent present or recognized Government controls territories in which commodity assistance has already been scheduled such as Taiwan, Tsingtao, Canton or North China. It would appear, moreover, there is nothing in statute as such which makes impossible for ECA with concurrence Department State or with approval President, to extend aid people of China who find themselves placed under control new political administrations provided working arrangement with de facto authority can be arrived at. Occurs to me such arrangement might consist not of bilateral document such as presently exists but rather a statement limited conditions under which ECA would substantially complete present commodity program, especially food.
Alternative solution is possible amendment bilateral under which present recognized government authorizes ECA emergency assistance areas over which it temporarily loses political control. Quid pro quo for such amendment would be ECA willingness publicly [Page 658] to give credit recognized government’s action in safeguarding minimum needs its population in occupied cities. This alternative mentioned only as last legal resort as it would put US foreign policy at mercy Chinese Government.
Conditions ECA assistance could be made publicly known through radio broadcasts and otherwise. If new political authorities refuse acquiescence such conditions their refusal would be made known. Such refusal would make it clear literate Chinese that once again Communist policies had deprived people of US assistance. Acquiescence such conditions on other hand would constitute significant break international policy line of Moscow and would serve to encourage nationalistic sentiments most Chinese.
Position taken this cable summarized as follows:
Communist or coalition Government will not have thoroughgoing control population which at least potentially hostile and not sympathetic to ideology international or even national communism. Right US policy in fact may prevent establishment thoroughgoing control and especially control those subservient Moscow.
Immediate termination entire aid program would temporarily increase difficulties new government but not sufficiently to lead to its collapse. Such termination would, however, prove to popular satisfaction truth Communist propaganda.
By limited emergency aid US would have relatively little to lose and perhaps much to gain.
Would appreciate your comments above recommendations. Needless to say, we are proceeding further in consideration particular conditions which should be stipulated unilaterally if policies (a) or (b) receive approval.

Also emphasize that above recommendations relate only to commodity assistance under present act and that somewhat different considerations relate to industrial program, as well as to any possible assistance under new legislation. More about these matters later.

Sent Washington; pouched Nanking.

  1. Not found in Department files.
  2. Generalissimo Chiang Kai-shek.
  3. Made public by the Secretary of State at Commencement exercises at Harvard University on June 5, 1947; for text, see Department of State Bulletin, June 15, 1947, p. 1159. For documentation, see Foreign Relations, 1947, vol. iii, pp. 197 ff., under the title “The Political and Economic Crisis in Europe and the United States Response”.