794A.5 MSP/12–853

No. 159
The Ambassador in the Republic of China (Rankin) to the Department of State

secret
No. 343

Ref:

  • Embassy Despatch 192, October 8, 1953, “Interview with President Chiang Kai-shek on United States Review of Chinese [Page 341]Military Budget”;1 Embassy Despatch 225, October 21, 1953, “MAAG Dissatisfaction with Chinese Military Budget Procedure”.2

Subject:

  • Ministry of National Defense Budget Estimate, January–June 1954.

MAAG’s review of the Ministry of National Defense budget estimates for the first half of Calendar Year 1954 was completed by the middle of November 1953. The total amount approved is a substantial downward revision from the NT$1,098,000,000 requested by the MND but is still more than NT$45 million above the ceiling figure set by the Executive Yuan (based more or less on last year’s expenditures). MAAG believes that the amount in excess of the ceiling is justified by the increased military activity on Formosa, including expenditures required to absorb increased deliveries of MDAP matériel.

Subsequent to MAAG’s approval of these reestimates, several additional items totaling under NT$20 million have been approved, first by MAAG and second by Committee C (Budget and Taxation) of the Economic Stabilization Board, provided sufficient funds are available through increased revenues.

Officers of the MAAG are justifiably proud of their achievement in persuading the Ministry of National Defense to present a properly documented budget estimate, which is a unique procedure in the Chinese military establishment. According to a MAAG finance officer, Chinese officers are “gazing in awe” at the yellow-bound volume, three inches thick, which is the product of joint MAAGMND efforts. Details of the estimate are contained in the following enclosures to this despatch.3

Enclosure 1: Letter from General Chase to General Chou Chihjou, Chief of the General Staff, MND, in which the total estimate is broken down by appropriations.

Enclosure 2: Letter from General Chase to the Department of the Army, Washington, explaining the importance of MAAG’s participation in the preparation and review of the budget and the necessity for an increase over comparable 1953 figures. He mentions the possible necessity for further consideration of direct US aid to the Chinese Government’s budget.

Enclosure 3: Letter from General Chase to President Chiang Kai-shek in which he reviews the whole problem of budget procedure within the Ministry of National Defense. Singled out for criticism are the system of allowances within the armed forces and the fallacy [Page 342]of basing vital programs on supplemental appropriations. General Chase points out that the “most important single weakness” observed by the MAAG is the lack of authority given to the MND’s Bureau of the Budget. Adequate civil review is also recommended.

Enclosure 4: (One copy) is the Budget Estimate itself, with comments by MAAG officers on specific appropriations.*

For the Ambassador:
Howard P. Jones

Counselor of Embassy
  1. Despatch 192 reported in detail the interview summarized in telegram 215 from Taipei, Document 142. (794A.5 MSP/10–853)
  2. Despatch 225 enclosed a letter from General Chase to Rankin expressing dissatisfaction with budget procedure within the Chinese armed forces. (794A.5 MSP/10–2153)
  3. None of the enclosures is printed.
  4. This is the only copy of the estimate which can be sent to Washington. It should be made readily available to interested Pentagon officials. [Footnote in the source text.]