893.51/4–649: Telegram

The Ambassador in China (Stuart) to the Secretary of State

709. Both Acting President and Premier have again and separately raised question of US financial, economic assistance. Prime Minister is still hoping to secure silver loan from US and suggested lien on Island of Taiwan or on its products as security. Acting President, through his emissary Kan,40 emphasized imminent danger of collapse of Government because of fiscal situation; he asked if this did not warrant American aid sufficient to keep Nationalist Government going at least through peace talks. In response to latter’s comment, I felt compelled to speak frankly. I pointed out difficulties from American standpoint in securing financial assistance. I called attention to well-known fact that Chinese Government has reportedly something less than 300 million dollars in gold and silver bullion and foreign exchange; that most of this reserve existed, or was made possible, because of previous American aid; that it would seem natural to draw upon this fund for present emergency. Our officials in Washington were of course fully aware of this reserve fund. I continued that if peace could be secured, it would not be too difficult for new government to build up fresh reserve in atmosphere of peace and period of productive activity; that if fighting were renewed, these reserves would either fall under control of Communists or be consumed within brief period of time in efforts further resistance.

I referred to analogous problem of munitions from US. Acting President and Premier had suggested that ships bringing last consignments be diverted to Hong Kong or Canton for equipment of Pai Chung-hsi41 and Chang Fa-kwei.42 I pointed out that there were technical difficulties in such procedures, and that in any event it seemed unnecessary, since there were ample stores of munitions in warehouses at Keelung. Problem in both cases was of course that Generalissimo controlled greater share of National Treasury reportedly stored in Taiwan and that through his appointed governor Taiwan,43 he also [Page 754]controlled warehouses full of munitions there. I added that from record past 3 years, there was but slight hope of effective resistance to Communists under this leadership. I continued that if Acting President and Premier had responsibilities for Government, they should also have authority utilize all available Government resources. I was aware of difficulties and embarrassment for them and of danger to peace negotiations by forcing issue with Generalissimo now. Nonetheless, this was problem that sooner or later would have to be faced. It was, I added, Chinese problem which they should not look to us to solve for them. Kan understood that my remarks were only for ears of President and Premier and, I believe, he also understood their import.

Sent Department 709, repeated American Embassy Canton 223, Shanghai 336, Taipei 33 (for Merchant).

  1. Kan Chieh-hou. For correspondence on his mission to the United States, see pp. 699 ff.
  2. Military and Political Affairs Director for Central China.
  3. Commander in Chief of the Chinese Army.
  4. General Chen Cheng.