893.50 Recovery/3–1749

Memorandum of Conversation, by the Director of the ECA China Program (Cleveland)84

A meeting on the future plans for the program of economic aid to China, administered by the Economic Cooperation Administration, was held in the Office of the Secretary of State on March 10. Present and participating were Secretary Dean Acheson, Administrator Paul Hoffman, Roger Lapham, Walton Butterworth, and Harlan Cleveland. A memorandum from Mr. Lapham to Mr. Hoffman dated March 9, 1949, on “Recommendations re China Policy”, was read through and then reviewed point by point. Following is a summary of the decisions reached, in which both the Secretary and the Administrator concurred:

The statement in Mr. Lapham’s memorandum regarding policy toward areas in China occupied by the Communists was, in general, in line with the policy decision just reached by the National Security Council.85
Mr. Hoffman suggested that ways and means should be found to assist the voluntary agencies operating in China to continue their work, if it is possible to do so. The Secretary took this matter under advisement.
With regard to those areas in China not occupied by the Communists, the China Aid Program is to be administered with “orderly liquidation” as its objective. It is contemplated that if the situation in China continues to develop along the lines now indicated, no request for an economic aid appropriation will be made of Congress [Page 631]beyond the present request for an extension of the time in which the $275,000,000 appropriation can be used.
With respect to the commodity program on the Chinese mainland, the concept of orderly liquidation means the following:
ECA should taper off its program in Tsingtao and withdraw when present commodity stocks are exhausted.
In the other cities (Nanking, Shanghai, Canton, and Swatow), the commodity program should be gradually tapered off, preserving funds sufficient to conduct an economic operation on the Island of Formosa if that proves to be desirable, and sufficient funds for continuation of rural reconstruction activities. The objective in the case of the food program, should be to carry the rationing systems through to the harvest. ECA should not furnish a monthly amount of cotton in excess of the normal share of cotton consumption which it has furnished heretofore, and should taper off this program in whatever manner seems most feasible from an operating standpoint, having also in mind the desirability of keeping stocks to a minimum. (In this connection, Mr. Hoffman made clear that if the Communists take Shanghai at any time within the next two or three months, ECA will be caught with a considerable volume of raw cotton, yarn, and textile stocks.)
The Rural Reconstruction Program should be continued and supported in accessible areas of the Chinese mainland. This program should continue at least during the life of the ECA Mission in China, and if possible thereafter, by endowment or other arrangements for carrying it on without direct ECA participation. It was agreed that every effort should be made to meet the problem created by the difficulty of securing local currency support for the Rural Reconstruction Commission, if necessary by securing sufficient Congressional authority to use ECA dollars to finance expenditures within China for the Rural Reconstruction Program. (Mr. Lapham indicated that it might be necessary to revamp the Joint Commission on Rural Reconstruction, perhaps making it wholly an American program.)
No capital equipment programs are to be authorized for the Chinese mainland. In Yunnan, efforts should be made to get the tin out while the area is still accessible, but no capital development program should be carried on. This decision also rules out the proposed project for assistance to Chinese airlines.
Plans will be laid for a program of economic support to Formosa, including proposed capital expenditures for industrial replacement and reconstruction, which should be brought as near to the point of consummation as feasible without additional allocation of funds. The fertilizer distribution program now planned, together with some rural reconstruction activities, will be carried forward. No capital expenditures [Page 632]will be authorized unless and until the political circumstances are judged to be propitious for an all out economic program on the Island. However, it is not considered that the time has yet come to institute such a program.

  1. Copy transmitted to Mr. Butterworth by Mr. Cleveland in his letter of March 17, not printed. In a letter to Mr. Cleveland of March 19, Mr. Butterworth agreed that this memorandum adequately recorded decisions reached at the March 10 meeting.
  2. NSC 34/2, February 28, p. 491, was approved March 3, see memorandum, p. 499.