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

893.50 Recovery/5–1949

Memorandum by the Director of the Office of Far Eastern Affairs (Butterworth)

[Washington,] May 19, 1949.

At a meeting held in the Secretary’s office this morning, attended by the Secretary, Mr. Hoffman, Administrator for Economic Cooperation, Mr. Cleveland,²¹ ECA, Mr. Butterworth, FE, Mr. Merchant, FE, and Mr. Sprouse, CA,²² the discussion was devoted to the question of the future ECA program in China. Mr. Hoffman explained that ECA wished to be certain that its future program in China was carried out within the framework of United States policy and then raised for discussion certain problems in connection with the program. The following decisions were reached with respect to the continuation of the ECA program in China:

1. Shanghai. ECA deliveries of food for the rationing program and fuel to ensure the continued operation of the public utilities would be continued provided such deliveries did not necessitate what would, in effect, constitute the “running of a blockade” by American shipping. If the present Communist siege, which has halted the entry of American flag vessels into Shanghai, were lifted sufficiently to permit the safe passage of American shipping and if the Communists were still not in occupation of the city, there would be no objection to the use of American flag vessels for the delivery of ECA commodities to Shanghai. Further deliveries of ECA commodities in American vessels would, in brief, be resumed if conditions at Shanghai made possible the resumption of normal shipments of commercial cargo to Shanghai and if the city were still not under Communist control. Deliveries would not be made in American vessels if the entry of American flag shipping endangered the lives of the crews or the ships, but there would be no objection to the use of Chinese shipping, or Chinese lighters from a safe anchorage point on the Yangtze River, for the continued delivery of ECA commodities prior to Communist occupation of Shanghai. ECA would not underwrite any risks encountered in deliveries to Shanghai. If the partial lifting of the Communist siege without Communist occupation of the city, thus enabling the continued delivery of ECA commodities, were to continue for an indefinite period, it would be necessary to review this decision. Cotton would not be included in the commodities to be delivered to Shanghai in the future.

2. Canton. Food and fuel should continue to be delivered to Canton and other cities in south China now included in the program on the basis of minimum stock-piles as long as these cities remain under non-Communist control, but no new program of this nature should be initiated.

3. ECA Personnel. ECA Mission Headquarters, as such, should not move to west China, but a small regional group should remain at Canton to continue the program at that city as long as possible. Any movement of ECA personnel to Taiwan should be limited to a small number. The movement of the Headquarters should be “played by ear”.

4. JCRR. The JCRR program should be continued and expanded where possible in areas of west China not under Communist control. Legislative authority exists for its continuation until February 15, 1950 and a proposal to continue the rural reconstruction program in China under the President’s Point IV Program²³ has been included in the draft budget proposal for technical assistance to underdeveloped areas. JCRR Headquarters may be moved to Szechuan or to some other point in west China, but the removal of the Headquarters should not be carried out in such a way that it plays any part in the decision of the Chinese Government regarding its removal from Canton or the site of its possible new location. The removal of the JCRR Headquarters should follow rather than precede the decision of the Chinese Government regarding its removal from Canton. The U.S. Government should not place itself in the position of guaranteeing the safety of the Chinese members of the JCRR or of the JCRR staff.

5. Formosa. Consideration of the general problem of Formosa and the ECA program on the island should be deferred for subsequent discussion with Mr. Merchant, who has just arrived in Washington from Formosa for consultation on this problem. The J. G. White engineering staff should be maintained by ECA for the time being under its present contract, giving whatever informal advice and assistance is feasible to the local Chinese authorities on Formosa, until a final decision is reached on the over-all problem of Formosa.

21. Harlan Cleveland, Executive Assistant to the ECA Assistant Deputy Administrator for Program (Bissell).
22. Philip D. Sprouse, Chief, Division of Chinese Affairs.
23. The fourth major course of action set forth in President Truman’s inaugural address of January 20, whereby benefits of American scientific advances and industrial progress would be made available for improvement and growth of under-developed areas; for text of address, set Department of State Bulletin, January 30, 1949, pp. 123–126.