893.50 Recovery/6–448: Telegram

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

1002. We have discussed with Luboshez Deptel 768, May 21, regarding Surplus Property agreement. Question is posed at time when apparently there is flux and uncertainty in policy of Army and Navy regarding surplus property. We understand that as a result of augmented requirements Army has issued directive to conserve property and suspend surplus property declarations pending determination of definite requirements. Navy policy not yet ascertained.

Nevertheless, we feel that this is appropriate time to open discussions at high level in Foreign Office on plans of Chinese for completion of property removal. If, during discussions, Chinese raise question of so-called under-run, we believe that by use of moral persuasion at high level and without tying discussions in with other problems, we can persuade Chinese to drop issue. General Kiang of Bosey has been documenting a case to support charge of material disparity between the property sold to China and the consideration given therefor by China. Luboshez states that, even though Kiang has instances which are bad, the general picture is more favorable than the Chinese present. There are too many uncertainties involved, he says, for any precise factual determination to be possible without prolonged and acrimonious arguments and inquiry which we all agree would be highly undesirable.

We recommend, and Luboshez concurs, that we be authorized to initiate at Foreign Office discussion on improvement in removal operations. Sent Department 1002; repeated Shanghai 445.