Foreign Relations of the United States, 1948, The Far East: China, Volume VIII

893.24/6–948

The Chinese Embassy to the Department of State¹⁸

undated

Memorandum

With reference to the proposed negotiations for the settlement of war accounts between China and the United States, the Department of State furnished the Chinese Embassy last year with two overall statements of defense aid provided to China for the respective periods before and after September 2, 1945, as well as a suggested list of items for discussion.¹⁹ The Chinese Government has given careful consideration to these documents, and the following data with a number of suggestions are herewith transmitted for the consideration of the United States Government.

It is hoped that after the United States Government has studied the contents of this Memorandum, meetings between the representatives of the two Governments will be arranged with a view to discussion and settlement.

The data herein transmitted consist of the following:

• Part 1. Summary of Chinese Eecords on Lend-Lease Transfers.
• Part 2. Comparison of U. S. Statements and Chinese Eecords on Lend-Lease.
• Part 3. Summary of Chinese National Currency Advances, Settlements and Remainders.
• Part 4. Uses of the 1942 500–Million Dollar Credit.
• Part 5. End Use of the Civilian Lend-Lease “Pipeline” Credit.
• Part 6. Lend-Lease Inventory in Possession of Civilian Authorities on September 2, 1945.
• Part 7. Summary of Miscellaneous Cases.

Part 1. Summary of Chinese Records on Lend-Lease Transfers.

A summary of Chinese records of U. S. lend-lease articles transferred to China is given in Table I,²⁰ which follows:

It is to be noted that for the period before September 2, 1945, U. S. Government authorities had established routine procedures to keep Chinese representatives in U. S. A. and in India informed of the details of shipment to, and arrival in, India of all lend-lease articles intended for China. The records of such information are summarized in the first three columns of the Section A of Table I.²¹

These lend-lease articles, after their arrival in India, were not automatically transferred to the Chinese Government; their disposition remained in the hands of the representatives of the U. S. Government. From time to time, various items were selected from the lend-lease stockpile in India and shipped into China, and only then, transfers to China were effected. The Chinese records of such shipments and transfers are given in the fourth and fifth columns of Table I.²² In addition, a portion of supplies shipped to India as U. S. lend-lease to China was eventually turned over to the Chinese representatives in India and accounted for as a part of the deliveries under the Pacific Surplus Sales to China. This group of supplies is given in the last column of Table I.²³

As for the period after September 2, 1945, no routine information concerning the shipment or arrival of lend-lease articles was given by the U. S. authorities to the Chinese Government. The only Chinese records available consist of the various field reports of transfers received at different localities and on different occasions. A compilation of these reports is given as Section B of Table I.²⁴

Part 2. Comparison of U. S. Statements and Chinese Records on Lend-Lease.

According to the U. S. statements of defense aid to China for the periods before and after September 2, 1945, the total values for the respective periods are as follows:

(1) For the period March 11, 1941 through September 1, 1945 US$798,724,514.91

(2) For the period September 2, 1945 through December 31, 1946 US$747,282,388.68

As explained in Part I, the Chinese records give the following amounts for the corresponding periods:

(1) For the period prior to September 2, 1945 US$113,405,406.48

(2) For the period after September 2, 1945 105,406,310.40²⁵

In order to ascertain the major factors underlying the wide discrepancy between the records of the two Governments and to enable the Chinese Government to make further checks on its own records for verification and clarification, the Chinese Government desires to obtain from the U. S. Government the following information:

(1) More details concerning the nature of articles and services other than those given in the overall U. S. statements, especially regarding the groups labelled:

a. “Miscellaneous & Contingent Expenses Undetermined” US$232,920,665.88 in the statement for the period prior to September 2, 1945.

b. “Miscellaneous Services & Expenses, Undetermined” US$318,341,746.85 in the statement for the period after September 2, 1945.

(2) Dates, places and quantities of lend-lease articles transferred to China; names of Chinese receiving agencies and, if possible, transcripts of documents given by Chinese representatives acknowledging receipt.

(3) United States accounting status regarding those categories of supplies which were originally charged to the account of lend-lease to China but were subsequently transferred to the Chinese Government under other arrangements, such as delivery under the Pacific Surplus Sales Agreement.

Part 3. Summary of Chinese National Currency Advances, Settlements & Remainders.

During the period between July 1, 1942 and August 30, 1946, the Chinese Government had made substantial advance of funds in CN Currency²⁶ to meet the needs of U. S. Army operations in China. For settling these advances, the two Governments held several negotiations both during and after the war. As a result of these negotiations, a portion of these advances has been repaid to China or credited to China’s payment account for the purchases under the Pacific Surplus Sales Agreement. There is, however, a substantial remainder not covered by the previous settlements.

A summary of these advances, settlements and remainders for the different periods of disbursement is presented in Table II which follows:²⁷

Part 4. Uses of the 1942 500–Million Dollar Credit.

The 1942 500–Million dollar credit was allocated to the following uses by the Chinese Government:

Redemption of U. S. Dollar Victory Bonds,	US $100,000,000.00
Redemption of U. S. Dollar Savings Certificates	$100,000,000.00
Purchase of gold bullion.	$220,000,000.00
Freight, insurance & handling charges for gold purchase,	557,511.49
Purchases of textiles and cotton,	25,000,000.00
Cost of, and supplies for, printing banknotes	54,442,488.51
Total	$500,000,000.0028

Part 5. End Use of the Civilian Lend-Lease “Pipeline” Credit.

Under the Civilian Lend-Lease “Pipeline” Credit, China received 6,100 units of Dodge T–234 trucks together with the necessary spare parts. These trucks were specially designed for army transportation in the rugged hinterland of China through the Stilwell Road.²⁹ The total value of this item is estimated to be about 31.7 million dollars.

When the Civilian Lend-Lease “Pipeline” Credit agreement was concluded, it was clearly intended on the part of both Governments that this credit should fulfil some of the civilian requirements for the rehabilitation of China. Events in China, however, turned out later to be such that these trucks had to be used mostly for the military needs of reoccupation. The actual disposition of these trucks with their spare parts is as follows:

To the Chinese Army,	5,014 units,
To civilian use,	1,096 units.

The Chinese Government hopes that the above facts will be taken into account in the discussions regarding the Civilian Lend-Lease “Pipeline” Credit.

Part 6. Lend-Lease Inventory in Possession of Civilian Authorities on September 1945.

Appended hereto is a set of lend-lease inventories in the possession of the following six Chinese civilian agencies as of September 2, 1945:

• List 1. of Ministry of Communications
• List 2. of War Production Board
• List 3. of National Resources Commission
• List 4. of Salt Administration of the Ministry of Finance
• List 5. of National Broadcasting Administration
• List 6. of China National Aviation Corporation.

Part 7. Summary of Miscellaneous Cases.

The following is a provisional list of miscellaneous cases which appear to come within the scope of future discussions for war accounts settlement:

(1) Diversion of goods of the Universal Trading Corporation by the United States Army in India.

(2) Deficit on the operation of the lend-lease Liberty ships, S. S. Chungtung and Chungshan.

(3) U. S. Treasury bill to the Chinese Government to the amount of $3,075,250.63 for lend-lease truck parts transferred in October 1945.

(4) Interim receipts for 1,438 lend-lease trucks, as requested by the Department of State.

(5) Bill presented to the Chinese Government to the amount of $1,896.40³⁰ by the American President Lines for the passage of seven Chrysler technicians to India in 1944 under lend-lease sponsorship.

(6) Air Training Program expenses, for the period December 1, 1945 through June 30, 1946; included therein are also two bills to the Chinese Government for these air trainees’ passage expenses as presented by the American Mail Lines and the American President Lines, to the amount of $45,137.50 and $57,626.50 respectively.

It is probable that the U. S. Government, like the Chinese Government, is in possession of additional information concerning the above cases. A discussion of the above cases in the light of such additional information will be conducive to clarification and understanding as regards their factual aspects.

18. Presented to the Department by the Chinese Minister on June 9.
19. None printed; the Department’s files do not indicate the method or date of transmittal of the two statements to the Chinese. The list was handed to the Chinese Minister on April 22, 1947.
20. The various tables and lists (not printed) referred to in this memorandum were not ready at the time it was presented to the Department and were transmitted to William K. Miller, of the Division of Economic-Property Policy, on June 14 by E. H. Chow, Second Secretary of the Chinese Embassy.
21. These columns show that through September 1, 1945, American lend-lease transfers valued at $597,748,901.64 had been shipped from the United States; that the weight of these shipments was 1,118,605,002 pounds; and that 940,374,742 pounds had been landed in India under American control (893.24/6–1448).
22. These columns show that 74,306,899 pounds valued at $113,405,406.48 were shipped to China from India (893.24/6–1448).
23. This column shows that 105,738,962 pounds were transferred to Chinese control in India. No value was set on these supplies in Table I (893.24/6–1448).
24. This section shows that for the period after September 2, 1945, supplies valued at $105,406,364.40 were received by the Chinese (893.24/6–1448).
25. According to a memorandum of June 16, this figure was corrected to $105,406,364.40 (893.24/6–1648).
26. Chinese national currency.
27. This table shows that for the period July 1942 to “after August 30, 1946”, Chinese currency advances amounted to CN 273,917,637,682.26; that CN 162,950,-841,776.59 had been settled by agreements in November 1944 and June 1945 and through the surplus property agreement of August 30, 1946; and that there remained to be settled CN 110,966,795,905.67 which the Chinese valued at $280,623,786.71 (893.24/6–1448). The terms of the 1944 and 1945 agreements are contained in letters from the Secretary of the Treasury, Henry Morgenthau, Jr., to Dr. H. H. Kung, November 25, 1944, Foreign Relations, 1944, vol. vi, p. 948, and June 27, 1945, ibid., 1945, vol. vii, p. 1108. Those of the 1946 agreement are in article 6.
28. These figures are in close agreement with those furnished in a letter by the Under Secretary of State to Senator Ferguson, June 27, 1947, Foreign Relations, 1947, vol. vii, p. 1149.
29. Named for Lt. Gen. Joseph W. Stilwell, Commanding General, U. S. Army Forces in China, Burma, and India, 1942–44.
30. Corrected to $1,996.40 in memorandum of June 16 (893.24/6–1648).