893.50 Recovery/5–1748

Memorandum by the Secretary of State to President Truman27

Subject: Administrative Terms to Govern the $125 Million Grant under the China Aid Act.

Section 404 (b) of Title IV (China Aid Act of 1948) of the Foreign Assistance Act of 1948 authorizes the appropriation to the President of a sum not to exceed $125 million for additional aid to China through grants, on such terms as the President may determine and without regard to the provisions of the Economic Cooperation Act of 1948. This section of the Act retains the exact wording, except for the substitution of $125 million for $100 million, of the Senate’s version of this portion of the Act. The pertinent portions of the Senate Foreign Relations Committee Report on Aid to China and debate in the Senate on this subject are, therefore, applicable to this section of the Act.

The Committee Report states that this grant is to be subject to “administrative terms which the President deems appropriate”, that the grant is to be used by the Chinese Government “without any of the conditions and controls which will prevail with respect to the [Page 76]expenditure” of the $338 million authorized under Section 404 (a) of the Act and that the Committee does not intend that the “Administrator of the Economic Cooperation Act should be held responsible for this part of the bill”. The Report further states that the grant is to be used by the Chinese Government “on its own option and responsibility” and “for whatever purpose decided upon by the Chinese Government”. Legislative history indicates that the phrase in the Act “on such terms as the President may determine” refers to procedural and financial terms and not to screening of requirements or supervision of end use.

During the debate in the Senate on the China Aid Act on March 29 Senator Vandenberg stated: “This process must be completely clear of any implication that we are underwriting the military campaign of the Nationalist Government.” Senator Connally stated: “It is in the nature of an outright grant to China for her own use, under her own responsibility, for whatever great and critical need may arise. There is not a word in the bill regarding military supplies or military aid. This measure is the best plan or device we could bring about in the Committee to extend aid to China, without making hard and fast commitments which we did not feel it was wise to make.”

It is recognized that such expenditures as the Chinese may make under this grant for items in short supply will have to be taken into account by the Administrator in connection with his programming of the requirements of other countries and his evaluation of the impact on the American economy. However, the Department of State should have no difficulty in arranging informally for the Chinese Embassy to keep the Administrator or other concerned Government agencies advised regarding Chinese expenditures under Section 404(b) of the China Aid Act.

In view of the expressed intention of the Senate Foreign Relations Committee, which originated this section of the Act, that the Administrator should not be responsible for this portion of the Act and in the light of the considerations listed above, it is recommended that the President delegate his powers under Section 404(b) of the China Aid Act of 1948 to the Secretary of the Treasury. Since the Chinese will not be able to make any expenditures under this grant until the required administrative terms are decided upon and incorporated in an agreement between the United States and Chinese Governments, it seems desirable that this matter be handled as expeditiously as possible. The Department of State would, of course, forward to the Chinese Embassy the document prepared by the Secretary of the Treasury setting forth the administrative terms to govern this grant and would arrange for an exchange of letters or for a formal agreement containing Chinese acquiescence to these terms.

G. C. Marshall
  1. Marginal notation: “Approved. May 17, ’48. Harry S. Truman”.