893.00/3–3049
Memorandum by the Deputy Director of the Office of Far Eastern Affairs (Allison) to the Secretary of State
In his telegram No. 633 [663] of March 28 Ambassador Stuart has given a well-founded picture of the accomplishments of the Acting President in the face of great difficulties. He has also presented justification for the continuation of economic support during the [Page 210] period of the impending negotiations between the National Government and the Chinese Communists.
Related to this description of the Acting President’s accomplishments is one given by the Embassy Office at Canton in its telegram No. 169 of March 25, describing the still influential position of Generalissimo Chiang Kai-shek as follows: The Generalissimo can be expected to continue to control, and in fact does control, a large segment of the army, navy and air force and he will almost certainly continue to control the secret police. It is unlikely that the Acting President and his group will gain control of the principal reserves of gold and silver and foreign currency. These factors, together with the development toward regionalism, will greatly hamper the effectiveness of the Acting President and his new cabinet and unless these difficulties are overcome, for which there appears little hope, the Acting President will have a very weak bargaining position vis-à-vis the Communists. In the final analysis, the Generalissimo continues to hold the balance of power in non-Communist China and is most unlikely to commit his influence unconditionally in support of Li Tsung-jen.
Congressional action to extend the authority of the China Aid Act of 1948,65 as requested by ECA and the Department, would enable for a short time continuation of U.S. economic support to the Chinese Government. However, the effect of such Congressional action and subsequent economic aid is likely to be modified by the limited character of the action and the possibility that about half of the funds available will be used for Taiwan industry and for the Rural Reconstruction program in south China, with a resulting sharp curtailment of cotton and petroleum deliveries to the Shanghai-Nanking area. This undoubtedly will be interpreted in China as a gradual liquidation of the ECA program.
Nevertheless, Canton’s comments tend to confirm the probability that the bargaining position of the Acting President will be affected much more by internal developments in China than by the existence and prospect of continuing U.S. economic support. Certainly, the importation of necessarily modest quantities of U.S. financed goods can have only marginal effect on the outcome of political negotiations as compared with the importance of the known relative military capabilities of the Chinese Communist and National Government forces.
- Approved April 3, 1948; 62 Stat. 158.↩