893.50 Recovery/3–1649
The Ambassador in China ( Stuart ) to the Secretary of State
[Received April 18.]
Sir: I have the honor to refer to your letter of November 29, enclosing a Policy Statement on China of September [27,] 1948.16 This statement on China is basically an excellent outline of American policy. Section (A), giving our objectives in China, is a sound and succinct expression of our long-term aims and requires no changes. However, Section (B)–1, dealing with policy issues, requires redrafting to take into consideration the momentous changes which have occurred in China during the past six months.
Despite our China Aid Program, intended to afford the Chinese Government a breathing spell during which it would have the opportunity to initiate the reforms essential to a long-range solution of its problems, the Chinese Communists have succeeded in occupying new and important areas, have destroyed a substantial part of the military forces remaining to the National Government and have forced the Government to sue for peace. The hoped-for reforms have not been instituted and economic conditions continue deteriorating at an accelerated rate. A feeling of extreme discouragement and defeatism pervades Nationalist China.
In the face of these developments we have been forced to withdraw our entire Military Advisory Group from China. The time is drawing near when the funds made available under the China Aid Act of 194817 will be exhausted, and the question must be considered urgently whether a continuance of some form of aid to the Chinese [Page 183] Government will further our objectives in China. The arguments against all-out aid advanced on page 2 of the Policy Statement, apply more strongly than ever in the light of uninterrupted military defeats suffered by Nationalist forces in recent months. The continuation of some kind of a limited aid program, however, perhaps exclusive of the military feature, is undoubtedly needed to strengthen the position of the Acting President in his negotiations with the Communists during the present armistice phase.
The situation in China is extremely fluid, so much so that it could change radically during the time required for Congress to consider and act on a new China aid program. It is also extraordinarily difficult to predict just what direction such a change might take. The present preliminary peace negotiations might continue for months, accompanied by significant political and economic developments within the territories controlled by the two contending parties. On the other hand, negotiations might be broken off at an early date and fighting resumed, with the Communists endeavoring to continue to devour the country piecemeal in a series of regional settlements. A third alternative is some sort of peace settlement, probably resulting in a coalition government, within a relatively short period of time. The uncertainty as to which alternative—or what combination of these alternatives—will prevail in the immediate future makes it difficult to draw up an aid program which would have any assurance of influencing the situation in our favor. Therefore, it would appear that the only feasible policy for the present is a flexible aid program designed to take every advantage of a fluid situation. In magnitude it need not be more than a relatively modest appropriation sufficient to continue supplying certain basic commodities such as cotton, petroleum, fertilizer and rice in order to retard economic deterioration in Nationalist China, conserve the Government’s foreign exchange and strengthen the Government’s hand in peace negotiations or in a threat of continued resistance. This aid might also include continuation of JCRR18 in areas open to it. United States Government representatives in China should continue to urge upon the Nationalist Government the institution of the basic reforms essential for its continued existence. Should progress be made along this line and as a result of this and other factors a political group arise showing promise of providing dynamic and progressive leadership in resistance to Communism, we could revive and expand our aid program.
Section B(2), dealing with economic issues, is a good statement, but out of date in certain respecte. The Treaty of Friendship, Commerce and Navigation19 has now gone into effect with the exchange [Page 184] of ratifications and concurrent exchange of notes.20 This fact requires wholesale redrafting of the third and fourth paragraphs of this Section.
With respect to the sixth paragraph of this Section on the subject of opening river ports to foreign shipping, there should be a revision to show that the Chinese Government has agreed in principle to the admission to inland ports of foreign vessels carrying United States aid goods with the proviso that individual ships must be cleared as a matter of form with the Executive Yuan. The fact is that there are no such cargoes in sight for the inland ports which renders the whole question academic. Moreover, this paragraph and the succeeding one should be modified somewhat in reflection of the fact that at the present low level of foreign trade, China has sufficient ocean and river shipping to handle such cargoes as are available for movement. On economic grounds of advantage either to us or to China, the opening of the river ports, at least under present conditions, no longer seems a sufficiently important objective to waste much political ammunition on.
Under Section (C), on relations with other states, it might be well to insert a paragraph referring to the current negotiations between China and the USSR regarding special rights for the latter in Sinkiang21 and mentioning that we have informally expressed to the Chinese Government our interest in the proposed agreement with respect to our rights under the Treaty of Friendship.
Respectfully yours,
- Foreign Relations, 1948, vol. vii, p. 612.↩
- Approved April 3, 1948; 62 Stat. 158.↩
- Joint Commission for Rural Reconstruction.↩
- Signed at Nanking, November 4, 1946; for text, see Department of State Treaties and Other International Acts Series No. 1871, or 63 Stat. (pt. 2) 1299.↩
- See Foreign Relations, 1948, Vol. viii, pp. 752 ff.↩
- For documentation on this subject, see vol. ix, pp. 1037 ff.↩