Memorandum by the Assistant Secretary of State for Far Eastern Affairs (Butterworth) to the Under Secretary of State (Webb)

You may recall having referred some time ago to the President’s having expressed an interest in the extent of U.S. interests in China. I am attaching hereto a memorandum setting forth briefly the nature and magnitude of our interests in China which may be of use to you should the President again express an interest in this subject.


Memorandum on United States Interests in China

Broadly speaking, United States interests in China include (1) American citizens, (2) private property and investments of American citizens, (3) trade, (4) United States Government property, (5) credits due to the United States Government by the Chinese Government, (6) United States Foreign Service establishments, (7) United States influence.

1. American Citizens. According to the latest information, 3,227 Americans are now residing in China. Of this total 241 are officials or employees of the United States Government and their dependents and 2,986 are private citizens. It is estimated that 3,018 Americans are now residing in areas under Communist control and 211 in areas still under Chinese Government control. It should be noted that an unknown but certainly substantial part of the persons listed above are in fact of Chinese or mixed Chinese race whose permanent home is in China and to whom American citizenship is largely a matter of convenience.

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2. Private Property and Investments. The latest comprehensive survey of privately owned American assets in China was made by the Treasury Department in 1943. According to this survey the value of such assets was approximately $122.2 million. Although information is not currently available upon which to make exact estimates, according to best available information the present value of privately owned American assets is between $100 and $200 million. This amount is almost evenly divided between direct investments in business enterprises, direct investments in philanthropic organizations and indirect investments including securities, notes, accounts receivable, and claims.

3. Trade. In the pre-war period the total value of United States trade with China fluctuated between $100 million and $125 million a year. The following table sets forth in millions of dollars the value of exports to and imports from China during representative pre-war and post-war years.

Exports Imports
1934 92.7 32
1937 55–65 68.5
1946 465 92.7
1947 353.5 116.7
1948 240 120.5

(Export figures for post-war years include UNRRA,45 Relief, ECA, and military assistance shipments.) Imports from Communist China for March 1949 through October 1949 were valued at approximately 10 million dollars. The value of American exports to Communist China during this period is not known but it is believed to be considerably smaller.

The proportion of United States total foreign trade accounted for by trade with China has been consistently small, never exceeding 1.9 per cent of total United States exports or 3.4 of total United States imports in the pre-war period and never exceeding 4.8 per cent total United States exports or 2 per cent of total United States imports in the post-war period.

In the pre-war period the United States supplied from 15 to 25 per cent of all China’s imports and took from 11 to 26 per cent of China’s total exports, being in fact China’s most important trading partner. In the post-war period 1946–48 the United States has accounted for a much larger percentage of China’s foreign trade, supplying 48 to 57 per cent of her total imports and taking 20 to 38 per cent of her total exports. This was due to abnormal post-war economic conditions and has been changing steadily to a more normal pattern as China’s alternative suppliers re-enter the market.

The loss of the China market would not be important for American producers as a whole, although producers of a few commodities (e.g. [Page 649] leaf tobacco, raw cotton, and timber) might feel the reduction in the market. A few articles (e.g. tung oil, bristles, tungsten ore, antimony, carpet wools) are of importance to certain sectors of our economy, but there is no article produced by China which is of predominant importance to the United States. Conversely China can in general obtain from alternative suppliers adequate quantities of articles essential to it.46

4. United States Government Property. The total purchase cost of United States Government real property in China is $11.8 million. (Of this total, properties costing $11.2 million were purchased with local currency made available under the terms of the bulk surplus property agreement of August 30, 1946.47) These properties include buildings for Foreign Service establishments in China and certain property purchased at Tsingtao and Shanghai at the instance of the United States Navy.

5. Credits Due the United States Government by the Chinese Government. Outstanding obligations of the Chinese Government to the United States Government resulting from financial assistance directed primarily toward economic rehabilitation, amount to $157.5 million. Such obligations resulting from financial assistance primarily of a political character amount to $642 million. The two governments have not yet agreed upon terms of settlement for most of the latter obligations.48

6. United States Foreign Service Establishments. The United States has Foreign Service establishments at Peiping, Tientsin, Shanghai, Nanking and Taipei. Offices at Hankow, Tsingtao and Kunming have closed and the staffs have been or are being evacuated. Foreign Service establishments constitute important interests of this Government in China because of the services which they perform for American citizens and the measure of protection which they have afforded Americans and their properties. Furthermore, they provide valuable sources of information regarding developments in the country and important channels of American influence.49

7. United States Influence. Throughout the past one hundred years, American influence has grown steadily in China and, notwithstanding setbacks during the past year or so, it remains one of our most valuable assets in that country. American championship of and support for expanding educational facilities have contributed much to this development. American founded and supported institutions of higher education including Yenching University, Peiping Union Medical College, the University of Nanking, Ginling College, Lingnan University, [Page 650] St. Johns University, Fujen University and Hangchow Christian College, enjoy an outstanding reputation in Chinese scholastic circles. Many influential officials in both the Nationalist and the Communist camps have been educated in these or other American institutions, while Chinese presently studying in such institutions will supply much of their country’s future leadership. This is particularly true in China where the opportunities for higher education are relatively few and there is a scarcity of men with a background of advanced education. The remission for educational purposes of the punitive portion of this country’s share of the Boxer indemnity and, more recently, use of Fulbright funds for similar purposes have further contributed to the reservoir of educated Chinese oriented toward the United States. American mission activities involving direct contact with large numbers of Chinese and including the maintenance of schools and hospitals have likewise contributed and are contributing to the spread of American influence, as have American business men and technical personnel in their daily contacts with Chinese. Finally these activities have been favored by American policy toward China which traditionally has sought to preserve the integrity and independence of the country, has opposed the seeking of special rights and privileges and has taken the lead in renouncing extraterritorial privilege. Consequently, the Chinese have seen less danger of exploitation in American activities of this nature than in similar activities of other countries and have been correspondingly less hostile to American influence.

China is approximately as large as the United States and has a population three times as great. With this in mind, it is evident from the foregoing that the monetary value of our stake in China is comparatively small. But from the standpoint of our national interests much more important than the dollar value of our trade with China and of the physical assets of American missionary and educational institutions, American business and industrial organizations and American Foreign Service establishments is the importance of these as purveyors of American influence, as symbols of American interest in the Chinese people and as sources of information. Their value to us in this sense represents the accretion of more than a century of governmental and private endeavor. It is in this sense that they are one of our principal assets in China today.

  1. United Nations Relief and Rehabilitation Administration.
  2. See also vol. ix, pp. 817 ff.
  3. Signed at Shanghai; Department of State Publication No. 2655, Report to Congress on Foreign Surplus Disposal (October 1946), pp. 40–45.
  4. See also vol. ix, pp. 720 ff.
  5. See pp. 933 ff.