893.50 Recovery/3–2449: Telegram
The Secretary of State to the Ambassador in China (Stuart)
389. For Merchant from Butterworth. Contingency funds for Formosa are included in current request for authority to spend balance unexpended by Apr 3 of Section 404(a) China Aid Act8 which Dept supporting in large measure for that reason. Furthermore public justification of separate appropriation for Formosa would in present circumstances produce variety of complications including supplying Russian and Chi Communists with irredentist issue directly attributable to US “imperialism”. From this morning’s Executive Session Senate Forn Relations Committ it evident far as that body concerned that except for Formosan situation and feeling on part of few members of Committ desirability going along little further to avoid accusation rug pulling not even this authorization would be supported. Therefore follows that every reasonable attempt must be made to bring Formosan situation to a head sooner rather than later and that US ante will at least initially be limited to say $17 million capital reconstruction plus certain amount commodities particularly fertilizer and that local separatist regime will have to bestir itself as regards external trade particularly with Japan and if necessary make use gold supplies with no further grants-in-aid in immediate offing. This will no doubt entail cut backs in ECA operations mainland and in my opinion particularly in cotton which I regard as indefensibly large, e.g. Central Bank applied to Federal Reserve for using dollar balances to purchase gold for use GY8a purchase operations Shanghai. If in unlikely event mainland negotiations move quickly and result in coalition Govt and correspondingly Formosan situation felt favorable no reason why funds under currently sought authorization should not be concentrated on Formosa during life of Act.
Nanking’s 640 Mar 23 will be replied to separately. [Butterworth.]