Foreign Relations of the United States, 1949, The Far East: China, Volume IX

Executive Secretariat Files

Note by the Executive Secretary of the National Security Council (Souers) to the Council

[Washington,] October 6, 1949.

NSC 37/8

The Position of the United States With Respect to Formosa

The enclosed draft report by the Department of State on the subject is submitted herewith at the request of the Acting Secretary of State for consideration on the agenda of an early meeting of the National Security Council.

It is recommended that, if the Council adopts the enclosed report, it be submitted to the President with the recommendation that he approve the Conclusions contained therein and direct their implementation by all appropriate executive departments and agencies of the U. S. Government.

Sidney W. Souers

[Enclosure]

Draft Report by the National Security Council on the Position of the United States With Respect to Formosa

The Problem

1. To determine what modifications, if any, should be made in existing policy with respect to Formosa and the Pescadores in the light of present circumstances.

Analysis

2. Present U. S. policy with respect to Formosa and the Pescadores calls for efforts to deny those islands to the Chinese Communists through diplomatic and economic means. The diplomatic and economic means through which this objective is being currently sought are set forth in NSC 37/2 of February 3, 1949 and NSC 37/5 of March 3, 1949.

3. The Department of State’s memorandum of August 4, 1949 to the Executive Secretary of the NSC (NSC 37/6) outlines certain factors in the existing situation which indicate that the ultimate passage of Formosa to Communist control by external or internal action is probable. These factors remain unchanged. The current CIA¹¹ estimate is that without U. S. military occupation and control, Taiwan “probably will be under Chinese Communist control by the end of 1950.” During recent conversations in Washington the British have expressed the view that ultimate Communist control of Formosa is inevitable and have added that they can suggest no measures by which this might be prevented.

4. In considering the courses of action which the U.S. might pursue with respect to Formosa the following limitations must be kept in mind:

a. The Joint Chiefs of Staff have stated in NSC 37/7 of August 22, 1949, that they “must reaffirm their earlier opinion that the strategic importance of Formosa does not justify overt military action, in the event that diplomatic and economic steps prove unsuccessful to prevent Communist domination, so long as the present disparity between our military strength and our global obligations exist(s), a disparity that may well increase as a result of budgetary limitations and the commitments implicit in the North Atlantic Treaty.
“Therefore, replying specifically to the major question in paragraph 7 of the Secretary of State’s memorandum of 4 August 1949 (NSC 37/6), the Joint Chiefs of Staff do not regard Formosa and the Pescadores as of sufficient military importance to the U.S. under the circumstances set forth above to commit U.S. forces to their occupation under conditions short of war and on the assumption that in the absence of military measures these islands will sooner or later come under Communist control.” The Joint Chiefs of Staff, evidently envisaging the possible loss of Formosa in their strategic planning, add that “the probabilities of the Formosan situation make it more than ever necessary that every effort be made to forestall any weakening of the over-all United States position with respect to the Philippines, the Ryukyus, and Japan, in view of the greatly magnified importance of retention of our off-shore control in the Western Pacific area as a result of developments on the Asiatic mainland.”

b. The political importance of Formosa does not give rise to considerations of such importance as to justify overriding, on political grounds, the views of the Joint Chiefs of Staff quoted above respecting the military importance of the islands. On the contrary, it is believed that the employment of U.S. forces on Formosa would enable the Chinese Communists to rally support to themselves as defenders of China’s territorial integrity and handicap our efforts to exploit Chinese irredentist sentiment with respect to Soviet actions in Manchuria, Mongolia and Sinkiang.

5. Having in mind the limitations set forth in paragraph 4 above, the U.S. Government might endeavor to insure the continuing freedom of Formosa from Communist control by means of a greatly expanded program of economic aid coupled with a program of military assistance short of the employment of U.S. armed forces. This program might include the reestablishment of a military advisory group in Formosa and have as its prerequisite the undertaking by the Chinese authorities in Formosa of specific administrative and organizational changes designed to improve the over-all defensive position of the island. However, it is believed that it would be unwise to embark upon such a program at this time. Available information indicates clearly that the present weakness of the Island does not arise from lack of economic resources or military materiel. The major portion of the Chinese Government’s gold and silver holdings and foreign currency reserves, estimated to be in excess of one hundred million US dollars is located on Formosa and available to the Chinese administration there. It is believed that likewise the major portion of the military materiel purchased under the $125 million grants is stockpiled on Formosa. It is reliably reported that during his recent visit to the Philippines, the Generalissimo stated privately that he had sufficient resources to hold out on Formosa for at least two years without outside assistance. In view of its natural resources, the economy of Formosa could be made almost completely self-sufficient under efficient administration, although this would be more difficult at present owing to the influx of large numbers of civilians and armed forces from the mainland. The basic weakness of the Chinese administration in Formosa arises rather from the transfer to the Island of the ills and malpractices that have characterized the Kuomintang in China. Against this, external material assistance alone cannot provide a remedy. Under these circumstances the undertaking by the U.S. of an expanded program of aid would in all probability tend to convince Chinese leaders that the U.S. was determined to prevent Communist capture of Formosa regardless of the steps taken by the Chinese themselves and it would therefore discourage rather than encourage essential measures of self-help. Moreover, embarking at this time on an industrial reconstruction program which would not bear fruit for a considerable period would increase the future value of the Island to the Communists if they succeed in seizing control without strengthening its economic powers of resistance in the crucial months ahead. In fact a capital investment program now would have the effect of contributing seriously to the present inflation, thereby complicating rather than helping the immediate economic problem. This Government would find its prestige and its resources engaged in a venture which on the basis of experience would hold little chance of success. In summary, a program of aid of this nature would supply economic assistance and military materiel not considered at present necessary to a solution of the problem; it would commit American resources and prestige to what is in all probability a lost cause unless the Chinese themselves were to initiate and faithfully carry out essential measures of self-help, and at the same time it would tend to remove their incentive to do this; and finally, it would greatly strengthen the suspicion among Chinese, Communist and non-Communist alike, of U.S. “imperialistic” design on Formosa, thereby consolidating Chinese public support behind the Chinese Communists and tending to nullify our efforts to exploit Chinese irredentism arising from Soviet actions in the North.

6. In view of the circumstances outlined in the preceding paragraph, it would appear desirable to continue on Formosa a course of action along the general lines laid down in existing policy with certain modifications which take into account present conditions on the Island. This course of action envisages the continuation of the present moderate-sized ECA program and the program of the Joint Commission on Rural Reconstruction. Whereas an expanded program of aid would probably create on the part of the Chinese an unwarranted optimism with respect to U.S. intentions to safeguard the Island, abrupt cessation of existing aid would damage the morale and prestige of the present Chinese administration. It would, in fact, be widely interpreted as reflecting lack of interest on the part of this Government which is not in accord with the facts. But the primary objective of any course of action offering even a reasonable hope of success, must be the correction by the Chinese themselves of those administrative faults which are a major cause of the present precarious position of Formosa. To that end the extent of American interest in Formosa and the degree of American support for the present Chinese administration should be made unmistakably clear to the present Chinese authorities and to the Chinese and American publics. Since the real source of authority on Formosa is now Generalissimo Chiang Kai-shek, this Government’s views should be conveyed to him along the following lines:

The U.S. has no designs on Formosa and seeks no military bases or special privileges of any kind on the Island.¹² The U.S. Government will [does] not [intend to] commit any of its armed forces to the defense of the Island.¹³ It is concerned, however, lest the chaos of the mainland spread to Formosa and believes that a higher level of political and economic well-being must be provided if serious unrest is to be avoided and the legitimate aspirations of the population of Formosa met. The previous misgovernment of Formosa has been a cause for serious concern on the part of the U.S. and there have been disturbing indications of unrest among the population of Formosa as civilian refugees and military forces have arrived in large numbers on the Island. The U.S. attitude toward Formosa will depend largely on the action of the present Chinese administration in establishing an efficient administration which would seek to bring to the people a higher level of political and economic well-being. The resources of the Island, together with the material assets available to the Chinese administration are believed to be sufficient to enable that administration substantially to improve conditions through its own efforts. Unless effective steps are taken initially by the Chinese administration itself, external aid would be of little benefit and would be largely dissipated. The U.S. Government will, therefore, continue to watch with interest the efforts of the Chinese administration to initiate those measures which are necessary to provide the basis for effective administration and effective utilization of the resources of Formosa. While the U.S. Government will continue to furnish economic assistance to Formosa under existing legislation, the provision of any additional aid will depend upon the future performance of the Chinese administration on Formosa.

In order to derive the maximum effectiveness from this step, it is essential that the U.S. position be made clear not only to Generalissimo Chiang Kai-shek, but to the Chinese and American publics as well. This might be accomplished initially by means of a press release. It is believed that the approach should be delayed until Canton falls, at which time the division of power between Li and the Gimo and the latter’s undisputed control of Formosa should be clearly apparent to all.

7. Either of the alternative courses of action outlined in paragraphs 5 and 6 above might be accompanied by action within the United Nations. There are a number of forms which such action might take and a number of ways in which it might be initiated. However, in any realistic appraisal of the desirability of such action it must be kept in mind that the United Nations possesses no armed forces with which to enforce a decision respecting Formosa against the will of those in control of the Island. With respect to the possibility of the U.S. contributing forces to this end, the Joint Chiefs of Staff have stated in the NSC 37/7 that “The suggested possibility of future joint or concerted Formosan action with other governments within or without the framework of the United Nations would, from the military viewpoint, have serious implications in that our military involvement in Formosa might differ little in degree from that envisaged as a result of unilateral occupation.” In view of this circumstance, it is probable that any action contrary to the wishes of the present or future Chinese authorities in Formosa which the United Nations might take not only would fail to affect tangibly the fate of the Island, but would undermine the prestige of the United Nations as well. Informal and exploratory steps are now being taken to ascertain the degree to which the Chinese Government would initiate or cooperate in United Nations action respecting Formosa. Until information in this respect is available, it would be unprofitable to discuss the form which such action might take. However, even though Chinese cooperation were lacking, United Nations action with respect to Formosa might be advantageous as a means of obtaining wider support for the course of action which the United States follows. This possibility is likewise being explored.

Conclusions

8. The policy set forth in NSC 37/2 and NSC 37/5, respecting Formosa, should be continued. Steps should be taken following the capture of Canton by the Communists to make unmistakably clear to the Chinese in control of Formosa and to the Chinese and American publics the extent of American interest in Formosa and the degree of American support for the present Chinese administration of the Island. This should be done by means of an approach to the Generalissimo as outlined in paragraph 6 and by a public statement¹⁴ as suggested in paragraph 6.

9. Further consideration should be given to the desirability of concurrent action in the United Nations when information regarding the Chinese Government’s attitude toward such action becomes available.

11. Central Intelligence Agency.
12. Sentence subsequently deleted (NSC Action 254, October 20, 1949).
13. Bracketed revisions made subsequently.
14. Marginal notation: “NSC agreed to make no public statement (Action 254 10–20–49)”.