Memorandum of Conversation, by the Acting Assistant Chief of the Division of Economic-Property Policy (Shenefield)

Both Ambassador Koo and Dr. Tan had told me a week ago that they would have conferences with Dr. Wang,42 the Finance Minister, concerning the war accounts settlement as soon as the Bank and Fund meeting43 had concluded. They further stated that they felt that he would agree with their proposed recommendation to conclude a settlement soon.

Dr. Tan stated today that the Ambassador and he had discussed the war accounts settlement negotiations and that the Finance Minister was in general agreement with them that there should be an early settlement. He said that the Finance Minister’s approach was that China did not want to be alone with Russia among the large nations who had not made settlements. He stated that the Finance Minister, who was to arrive in Nanking October 8 (Friday), thought he should have agreement in Nanking to the settlement giving the Ambassador full power to negotiate in a matter of ten days after which he would communicate with the Foreign Minister who is now in Paris. Dr. Tan stated that he thought we should surely be able, to conclude a settlement within the present month.

Dr. Tan then mentioned several items in which he hoped for some consideration of a reduction, namely: (1) The West China Sale which he stated was hastily concluded and included considerable military property which might have been furnished under straight lend-lease and which might involve duplications with amounts charged for in the inventory, or otherwise; (2) Charges for automotive spare parts; (3) Dodge trucks; (4) Inventory. With respect to these latter three, he suggested that they were largely for military purposes and there might be duplication. I asked Dr. Tan whether any of these items were particularly troublesome for them in dealing with their government. He mentioned that the West China Sale had been subject to considerable criticism. I stated that we would be prepared to consider any reasonable proposal on these items but that the item on Inventory would be more difficult to deal with than the West China Sale since the treatment of Inventory was quite important in the settlement negotiations with the USSR which are still in progress.

I did not bring up the question of information on the uses of the [Page 702] $500 million loan which we had requested from the Chinese and have not yet received, nor did I mention anything about the treatment of the disparity claims which the Chinese have made in the Nanking negotiations with the Ambassador and Capt. Luboshez of FLC. I told him I was glad to hear of the Finance Minister’s conclusion and that while these details remain to be settled our figures (which now show a settlement amount of around $140 million) were in the range of a final settlement to which Dr. Tan offered no disagreement.

Dr. Tan stated that the payment of the July 1, 1948 installment on the 3c agreement44 would be made shortly and I have been informed since by the Treasury Lend-Lease Fiscal Office that it was received October 8, 1948.

(A reasonable position which I believe would easily meet Dr. Tan’s ideas for a further reduction in the settlement amount might be to lump the West China Sale—$20 million, the automotive spare parts item—$3 million, and the Dodge trucks—$6 million, together with other small items, reducing the total of $29 million to $15 million, and to eliminate the nominal charge for maintenance of $15 million. In addition, and contingent upon such a reduction, the surplus disparity claim should be offset in the amount of something like $25 million, thus giving a settlement figure of $88 million.)

  1. Wang Yun-wu.
  2. The annual meeting of the Boards of Governors of the International Bank for Reconstruction and Development and of the International Monetary Fund, September 25 to October 1.
  3. The “Pipeline” Agreement of June 14, 1946. By the expression “3c” was meant an agreement negotiated pursuant to section 3 (c) of the Act to Promote the Defense of the United States, approved March 11, 1941; 55 Stat. 31.