893.50 Recovery/1–2649: Telegram

The Deputy Economic Cooperation Administrator (Bruce) to the Consul General at Shanghai (Cabot)

Ecato 944. [To] Lapham from Hoffman re Toeca 858.56

Policy outlined Ecato 88557 clearly precludes US aid in any form to areas coming under Communist control. This necessarily implies reduction in scope and duration of JCRR58 program, both because collaboration with Communists or their associates barred and because termination of commodity program will eliminate or drastically reduce local currency resources available for Commission. Commission should therefore concentrate on projects which can be completed before anticipated Communist takeover or can be continued in areas likely remain under anti-Communist control.
In view adverse effect immediate abandonment, such projects as Tung Ting dykes for which firm commitment already made may be continued so long area involved not under Communist control. No new projects this nature should be started in vulnerable areas, which for present probably means all mainland. For info Amer members only,59 State Dept recommends urgent consideration possibility operation intensified JCRR program on Taiwan.
JCRR as presently constituted could probably not function anyway in connection with new regime since latter not likely recognize [Page 618]present Chinese commissioners or permit or provide local currency financing for continuance activities so closely associated US Govt and Kmt.60 However where provincial rural reconstruction foundations have been established before takeover, they will presumably continue to function and collect payments on JCRR loans as long as Chinese authorities permit, although direct participation by JCRR itself is excluded, and JCRR must cut off its direct contact with or control over such foundations.
We concur desirability assisting Mass Education and similar programs to extent feasible under present circumstances. However, Yen61 and other sponsors such projects should understand Commission help cannot be assured after areas involved come under Communist control. In discussing this matter with Chinese you should not reveal terms policy decision of Ecato 885. Difficulties summarized para 3 above should serve as sufficient reason.
In light these considerations we question whether Shreve program could be effectively initiated and developed on contemplated scale prior necessary withdrawal JCRR from most mainland areas. Please advise your views soonest.
Continuance conservancy, public works projects financed with local currency can be judged generally by same criteria as rural reconstruction. However, whole local currency problem raises special problems which covered separate cable. [Hoffman.]
  1. Copy of ECA telegram not found in Department of State files.
  2. January 14, not printed; it advised Mr. Lapham of policy decisions reached at the Cabinet meeting of January 14, along the lines of telegram No. 55, January 14, 8 p. m., to the Ambassador in China, p. 615 (893.50 Recovery/1–1449).
  3. Joint Commission on Rural Reconstruction.
  4. John Earl Baker and Raymond T. Moyer.
  5. Kuomintang (Nationalist Party).
  6. Y. C. James Yen, head of the Chinese Mass Education Movement and Chinese member of the JCRR.