794A.5 MSP/3–854

No. 177
The Ambassador in the Republic of China (Rankin) to the Department of State

top secret
No. 501


  • Embassy Despatch 399, January 12, 1954; Department’s Instruction A–129, February 9, 1954.1


  • Chinese Government’s Military Aid Proposals
[Page 379]

Explanation of high security classification: The MAAG has agreed to protect the classification of Chinese documents, and the Ministry of National Defense has refused to down-grade the Top Secret classification of the enclosed “Kai Plan”.2 MAAG comments on this plan are therefore also Top Secret. The other enclosures, as well as the information in the body of this despatch, may be handled as Secret.

Note: Transmitted with this despatch are various pertinent details of recent proposals regarding the future strength of the Chinese Armed Frees, together with rough estimates of cost. Technical discussion of these proposals falls largely within the province of the American Military Assistance Advisory Group, but certain features raise major policy questions for which the Embassy has responsibilities. The following paragraphs deal with such features, technical military details being mentioned for illustrative purposes only.


With the resumption of American military aid to China after the outbreak of the Korean War in 1950, emphasis naturally was placed upon preparations to defend Formosa and the Pescadores from possible attack. Some attention also was given to the question of maintaining internal order. However, the domestic position of the Chinese Government on Formosa and nearby islands was stronger than had been assumed in many quarters. Whatever danger may have existed in 1950 from potential internal disorders, Communist inspired or other, was soon dissipated incidentally to the growing strength of the Chinese Government as a result of expanded American military and economic aid.

The outbreak of hostilities in Korea found Free China with a military establishment of some 600,000 men stationed on Formosa, the Pescadores and a few islands near the coast of the China Mainland. This force was divided approximately as follows: Army 73 percent; Air Force 10 percent; Combined Service Forces 9 percent; Navy 5 percent and Marines 3 percent. Both the total strength and its distribution among the branches were largely the result of circumstances other than the actual defense requirements of Formosa. They represented the forces which it had been physically possible to evacuate from various regions of China before the Communist occupation. For obvious reasons, a larger percentage of officers [Page 380] had been able to get away than enlisted men, and a relatively greater number of Air Force and Navy personnel reached Formosa than in the case of the Army.

After preliminary surveys, which necessarily were rather hurried in view of the possibility of Communist attack, the United States tacitly undertook to supply the most obviously needed arms and other equipment for the forces then existing on Formosa and the Pescadores, which the Seventh Fleet had been ordered to help defend. These forces represented nearly 90 percent of the entire Chinese military establishment, the remainder being stationed on the offshore islands already mentioned. This was the only practicable approach at the time, since so much needed to be done simply to provide the minimum of arms and equipment required to deal with any enemy forces which might have been able to penetrate such naval and air defense as the United States could provide at the time. It has been assumed throughout, of course, that American naval, air and logistic support would be needed to assist in the defense of Formosa against a major enemy attack.

Policy Differences

Until recently, the basic divergence between Chinese and American policy had raised few practical difficulties. The Chinese Government is dedicated to the liberation of Mainland China, while the United States has undertaken no commitment either to support the Chinese in this purpose by the use of American forces or to provide the Chinese Government with arms, equipment, etc., beyond what may be needed for the defense of Formosa and the Pescadores. But the initial stages of Chinese rearmament involved substantially the same implementation in either case. At times the Chinese showed some impatience with what they regarded as the slowness of American deliveries, but it was generally understood that urgent needs in Korea or unavoidable delays in production in the United States were largely responsible.

The Korean truce coincided more or less with a degree of progress in the military aid program for Free China which met minimum defense requirements, other than against air attack. The basic difference between American and Chinese policy over the longer term therefore became more and more evident. The United States Government already has gone beyond a purely defensive concept in its plans to give the Chinese forces “limited” offensive capabilities. Quite evidently, however, much depends on the interpretation placed upon the word “limited”. For the foreseeable future, the strength of the Free Chinese forces will be limited in any case by the human resources available on Formosa and a few small islands, both as regards number of men fit for military service [Page 381] and their educational and technical qualifications. Other possible limitations would result from giving the Chinese sufficient equipment, etc., to stage raids on the Mainland up to division strength without being able to maintain a beachhead, or to provide a given number of divisions to reinforce other anti-Communist armies which might be under attack elsewhere in East Asia. This latter limitation would not be agreeable to the Chinese for the longer term, since it would imply abandonment of their great purpose of liberating the Mainland.

Experience has persuaded the Chinese that the United States cannot be expected to take other than a short term view in the practical implementation of Far Eastern policies. They place considerable reliance, however, on the general principles governing American foreign policy, which usually result in an adequate and effective, if tardy, response when a crisis arises. With this background, the Chinese count on (1) the future mistakes of the Communists, and (2) the force of circumstances in general to bring the United States around in due course to a practical policy of helping them in the liberation of Mainland China.

Chinese Pressure for Increased Military Aid.

Under the conditions just described, it is to be expected that the Chinese will endeavor to influence the United States in every way to make possible an expansion of their defense establishment. In the absence of an avowed American policy in this direction, the Chinese will attempt continually and from every promising angle to obtain more arms, more equipment, more money. This could tend in the direction of developing a “balanced” establishment, following previous patterns in the United States and Western Europe, rather than one planned for any specific purpose. Such a course would be in line with Chinese ideas of enhancing their own prestige and might be facilitated by traditional thinking in the United States. In consequence, the second half of the current military aid program, which could produce considerable offensive capabilities, might conceivably result in a military establishment rather well equipped with an orthodox assortment of armor, trucks, aircraft and fighting ships, and unnecessarily large for ground defense purposes on Formosa, but quite incapable of carrying out a successful campaign in the paddy fields and hills of South China. It should be added that the American officers at present in charge of MAAG, Formosa, are keenly aware of this situation and are doing their best to cope with it. In this, however, they are handicapped by the lack of clear directives as to the eventual mission of the Chinese military establishment or of any notion when it should be ready to carry out that mission.

[Page 382]

The current Chinese proposals for expansion are realistic at least to the extent that more emphasis is placed upon the enlargement of their Army rather than of their Air Force or Navy. Although opinions differ in detail, it is generally accepted that Formosa has the manpower to produce an effective army of 500,000 to 600,000 men, or one third to one half larger than at present, given the necessary American equipment and economic assistance. It also appears probable that the existence of such a force, with American logistic, and any needed naval and air support, would permit landing in South China, for example, and holding at least a sizable beachhead. Although the army envisaged would be no more than 50 percent above present strength, the larger gain in offensive power could be several times that amount.

It is obvious, however, that any increase in the Chinese military establishment would have to be financed entirely by the United States. There is no prospect of increasing public revenues on Formosa appreciably above the present total of about US$200 million annually. More than $100 million is required for civil government; if the Chinese were to cover this amount in full from their own resources, they would have left between $50 million and $100 million for defense purposes. A total similar in magnitude to this latter amount has been contributed annually by the United States, since 1951, in the form of “common use” items and “counterpart funds” in direct support of the Chinese Armed Forces. In addition, more than $200 million worth of military equipment (“hardware”) has been supplied each year.

The cost to the United States of any given increase in the Chinese defense establishment naturally would depend not only on the number of men involved, but on the manner in which they might be equipped. Presumably emphasis would be placed upon light infantry units, generously equipped with mortars, recoilless rifles, automatic weapons, etc., and involving a relatively low cost per man. On this basis the contribution of the United States for an expanded program might be less than the US$2,500 per man estimated by MAAG for equipment. Similarly, his annual maintenance might fall somewhat below the MAAG estimate of US$500. At present the corresponding figure for the entire Chinese military establishment is in the neighborhood of US$300. In any event, the cost would be far below that for American forces, while the proportion of combat troops in relation to those in support would be far higher.

The size and character of the Chinese Armed Forces, which logically should be determined by their mission, will also determine to a decisive degree the amount of economic aid required by Free China. Although total strength in terms of men has not changed [Page 383] appreciably for several years, accelerated arrivals of equipment and its care and use are producing an ever greater strain on domestic financial resources. The Chinese Government will do well if it can avoid a substantial deficit in the next fiscal year as a result, even with no increase in the number of men under arms. Should the United States decide to support an appreciably larger establishment, it would have to be done on the assumption that, after covering the costs of civil government, the Chinese Government probably could do no more than to pay and feed its Armed Forces. In addition to providing for all other types of military expenditure, the United States would have to continue the provision of economic support sufficient to balance Free China’s international payments by paying for essential imports, to keep its internal budgets in equilibrium on all levels of government, and to assist largely in financing the expansion of domestic production to maintain living standards in a rapidly growing population.

Chinese Government’s Aid Proposal for Fiscal Year 1955

As stated above, the Chinese military have demonstrated a tendency to approach the United States Government at more than one level and with more than one program in an attempt to obtain US backing for an expanded military establishment on Free China. The ambitious “Kai Plan”, to be dealt with later in this despatch, was handed directly to Admiral Radford at the time of his brief post-Christmas (1953) visit to Formosa.

What might be termed the “formal” Chinese FY 55 Aid Proposal was delivered to the Embassy under cover of a Ministry of Foreign Affairs Memorandum dated January 11, 1954. Copies were forwarded to the Department with Despatch 399 of January 12, 1954. The program is summarized in the Foreign Ministry’s Memorandum, Enclosure 1. In brief, it calls for an expansion to 3 Field Armies, comprising 24 Infantry and 3 Armored Divisions, plus supporting units; a Navy augmented by 6 destroyers, 10 DE’s, 2 transports (AKA and APA) and more than 100 landing and support craft; and 116 additional modern aircraft, from F–86’s to B–29’s, for the Air Force. “Common Use” Aid is set at US$55,124,000; Economic Aid at US$120,000,000.

The comments of the FOA Mission on the economic aspects of the proposal were sent to FOA/Washington in Tousfo A–485, February 10, 1954.3 The MAAG’s comments are attached as Enclosure 2; a letter from General Chase to General Chou Chih-jou dated February 4, 1954. With respect to the Army, this program is in a sense a counter-proposal to a Chinese Army reorganization plan drawn [Page 384] up by the MAAG in the fall of 1953, which calls for 2 Field Armies comprising 21 Infantry and 2 Armored Divisions. This reorganization plan has been accepted by the Ministry of National Defense only on condition that the MAAG will support the 3–Field-Army force defined in the Chinese Government’s FY 55 proposal.

In the enclosed letter General Chase expresses sympathy with the objectives of the Chinese, but calls their attention to several limiting factors, including the force basis approved by the Joint Chiefs of Staff, present ceilings on US dollar aid to Free China, and the questionable ability of the Formosan economy to absorb such an abrupt increase in the amount of annual military aid without running the risk of severe inflation.

The MAAG does not believe the Chinese Navy and Air Force capable of utilizing additional equipment other than that already anticipated for delivery during calendar 1954–55, namely, 2 destroyers (with the possibility of 2 more if the Chinese Navy is successful in operating and maintaining the first 2 received), a number of small and medium landing and support craft, and three or four groups of F–86 aircraft. The operation of B–29’s is considered beyond the current capabilities of the Chinese Air Force.

The Kai Plan

The Kai Plan, according to the Ministry of National Defense, was developed on the assumption that the Ministry’s FY 55 program would be accepted and is far more ambitious in scope. (The comment of one MAAG staff officer that it would require “a war-time mobilization of the entire US economy” is doubtless exaggerated, but gives an idea of the MAAG’s reaction to this proposal.) It was handed to Admiral Radford by President Chiang Kai-shek on December 28, 1953, and purportedly supersedes a plan originally proposed in a letter to the Admiral by General Chou Chih-jou, Chief-of-Staff of the Chinese Armed Forces, on June 4, 1953. (A letter which, incidentally, neither the Embassy nor the MAAG has seen.)

The Kai Plan is rather well summarized in a letter from Foreign Minister George Yeh to Admiral Radford dated January 4, 1954, a copy of which is attached as Enclosure 3. To be completed before the end of calendar 1955, the Kai Plan proposes an Army of 41 divisions (one airborne); a Navy which includes, in addition to the ships listed in the FY 55 request, 6 AKA’s, 6 APA’s, and a substantial increase in landing ships; and 531 new aircraft for the Air Force, including jet bombers (B–47’s). The Kai Plan does not call for any substantial increase in the Chinese Marine Corps.

The MAAG’s comments on the Kai Plan are forwarded as Enclosure 4, a letter from General Chase to the Adjutant General, Department of the Army, dated February 20, 1954. The detailed dicussions [Page 385] of the Army, Navy, and Air Force aspects of the Kai Plan are worth careful study. The tenor of General Chase’s observations is reflected in his statement that “much of the plan is completely infeasible of execution and that nearly every aspect requires a vast augmentation in the level of U.S. support, as well as a material modification in U.S. strategic policy.” He does not recommend any changes in his JCS Force Basis proposal for FY 1955, i.e., 21 infantry and 2 armored divisions, plus an increase in Chinese Marine Corps strength to 1 full division. An increase over ships and aircraft currently planned under the military support program is considered impractical.

Embassy Comment: From the Chinese point of view it is unfortunate that the proposals of the Ministry of National Defense have been of such grandiose scope. Having been presented with a bewildering assortment of ambitious figures, it is possible that Free China’s advisers have shown a natural inclination to devote more energy to demonstrating the infeasibility of the plans than to estimating what can be done to expand the Chinese armed forces, from a practical standpoint, provided Free China’s share of the annual US foreign aid program can be raised. While it is probably true that the growth of the Navy and Air Force presently envisaged by US support plans is very nearly the feasible maximum, this is less clearly demonstrable in the case of the Chinese Army. In the enclosed discussion of Army aspects of the Kai Plan it is asserted that the January 1956 time limit set by the Chinese for the establishment of the Kai Plan’s four Field Armies would be barely sufficient to recruit, train, and equip two Field Armies. However, it is admitted that the proposed program could be accomplished in from three to five years—perhaps not too long a time in this drawn-out Cold War—conditional only upon the availability of equipment, a sufficient number of US advisers, and funds.

The question of funds is of course fundamental to the above considerations and has been largely omitted from the several comments prepared by the MAAG, which were made largely from the point of view of technical feasibility. At Admiral Radford’s request, during his most recent visit to the island, the MAAG Controller and G–4 Sections prepared an estimate that each additional Soldier in the Chinese Army will cost the United States US$3,000 for the first year and $500 per year thereafter to maintain. This estimate was based on the practical assumption that the United States will have to pay all of the bills for an increased force—including equipment, pay, uniforms, housing, etc.—either directly or indirectly. Based on the MAAG’s conservative requirement of a ratio of 18 support personnel to 17 combat soldiers, the Kai Plan would require a force of 629,000 men (provided the number could be raised [Page 386] from the Formosan population), more than the 300,000 now included in the Military Support Program. On this basis the Kai Plan’s Four Field Armies would cost the US taxpayer $1,887,000,000 above current aid levels and, at $500 per man, an increase of $314,500,000 in annual maintenance—not including the additional amount necessary to cope with dislocations in the Formosan economy.

Imposing as these figures may be, they nonetheless compare favorably with the $5,600 it reportedly costs annually to maintain the average US infantryman. It has been demonstrated in Korea that it is possible to recruit, train, and equip divisions of poorly educated Asians at lower costs than equivalent US divisions, provided they can be given American air, naval and logistical support. The same can be done on Formosa—a strategic bargain which should not be overlooked if military developments in the Far East require a rapid increase in anti-Communist armed strength.

K.L. Rankin
  1. Despatch 399 enclosed a Chinese proposal for the U.S. aid program for fiscal 1955; instruction A–129 requested the Embassy’s comments on the proposal. (794A.5 MSP/1–1254)
  2. The “Kai Plan,” entitled “Special Military Aid Program, 1954–1955,” was handed to Admiral Radford by Chiang Kai-shek on Dec. 28, 1953, when Radford was in Taipei with Walter Robertson. It was not enclosed with this despatch, but was summarized in a letter of Jan. 4 from Foreign Minister Yeh to Radford, which was enclosed. None of the enclosures is printed.
  3. Not printed.