794A 5 MSP/10–653: Telegram

No. 142
The Chargé in the Republic of China (Jones) to the Department of State


215. Cotel. In view of approval of military budget by Executive Yuan and transmittal to Legislative Yuan prior to review by MAAG, I sought appointment with President Chiang to clarify matter and obtain his personal support for adequate budgetary review by US agencies. Accompanied by General Chase and Brent,1 acting chief of FOA, spent hour with President today this subject. Finance Minister Yen, Chief of Staff General Chou Chihjou, Secretary General Dr. Wang Shih-chieh, presidential aide General Pi were also there, latter serving as interpreter.

I pointed out vital importance to Chinese Government as well as to US Government for ample opportunity to be provided for MAAG study budget estimates and make recommendations before budget is finalized. If Chinese Government budget is not carefully coordinated with US military aid program, much money can be wasted. Unnecessary expenditures may be made, or, on other hand, there may be failure to provide funds necessary for efficient utilization of military equipment scheduled to be received. Finally, it is possible for MAAG to recommend to US government alterations in aid program deemed desirable to fit Chinese special needs. But such recommendations are impossible without clear detailed picture of military expenditures planned by Chinese.

I also outlined previously agreed upon procedures for such review by MAAG and requested assurances procedure met with President’s approval.

President agreed without hesitation. He pointed out there were two reasons for submission of military budget before concurrence by MAAG:

Constitution requires such submission before September 30.
Since final figures for US aid had not been received, budget could not in any event be finalized.

He emphasized it was not too late for revision of budget, that he wanted our suggestions and agreed MND and MAAG experts would review military budget in detail within next 30 days, making recommendations for revision.

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General Chase outlined budget objectives of MAAG and gave effective examples of waste in current program which obviously made deep impression on President who expressed appreciation for our assistance in this matter and then raised following questions:

Pointing out that Congress had appropriated 20 per cent additional funds for military aid, President queried whether this could be used for hard core or common use items, commenting that he felt the greatest need was in latter classification.
Referring to unspent counterpart funds from previous years, he queried how much these amounted to, asked whether they could be re-programmed or must be used for originally scheduled items. He would appreciate general clarification of whole matter.

All present assured President that, although answers to his questions were not immediately available, they would be forthcoming in near future. President requested answer to point 1 within 30 days to permit inclusion in budget planning. He expressed appreciation for visit.

Comment: Conference was harmonious throughout and, apparently, accomplished objective. Although many details remain to be ironed out with respect to both military and civilian sides of budget, both MAAG and FOA chiefs believe budgetary review can now be effectively implemented with backing of President.

  1. Joseph Brent, Deputy Director of the Foreign Operations Administration mission in Taipei. The Mutual Security Agency had been reorganized as the Foreign Operations Administration on Aug. 1, 1953.