124.934/9–552: Telegram
No. 48
The Chargé in the Republic of China
(Jones)
to the Department of State
230. This tel reviews significant recent development re pay increase for mil and civil servants and related budget problems.
Govt recently prepared pay increase plan which wld increase govt expenditures by NT $216 million per year to replace original plan (ref Tomus A–115, June 13, 1952)1 which wld have added NT $300 million yearly to expenditures. Fol conference last week with Pres Chiang, Chi members Econ Stabilization Board2 proposed at Aug 28 mtg partial adoption new plan providing pay increase enlisted men and non-commissioned officers and township and village govt personnel at increased cost NT $6.7 million monthly or 81 million per annum. Amer participants ESB mtg, while admitting real [Page 95] need for pay increase (common soldier receives 50 cents US per month), opposed proposal on budgetary grounds. Proposal referred back to subcomite for further study with instrs that procedure pay increase proposal submitted to ESB shld be accompanied by recommendations for providing necessary revenue.
Pay increase was known to be only one of several extra-budgetary expenditures contemplated by Chi Govt which if adopted wld threaten econ stability. These included extensive mil reserve training program and retirement program. It was my conviction shared by Dr. Schenck and Gen Chase (and by majority Chi members ESB, who, however, have not always been able make their views prevail in Exec Yuan and party councils) that basic issue of budgetary control was at stake. I, therefore, called series of conferences at my home Aug 30–Sept 1 attended by Min Fon Affairs, Min Finance and other top Chi officials and by Dr. Schenck and Gen Chase. These culminated in high-level Chi conference Sept 1 at which frank explanation budget sitn and US views thereon given Pres. Meeting had fol results:
- 1.
- Approval by Exec Yuan the next day of following principles
presented by Gov Wu:3
- a.
- Nat prov and local govt budgets to be consolidated and overall budget to be kept in balance;
- b.
- If expenditures threaten exceed revenues lower priority expenditures to be eliminated or reduced;
- c.
- Duplication of agencies at various govt levels to be eliminated;
- d.
- Consolidated budget to be drawn up for all public enterprises thus clarifying fin position this important segment govt operations.
- 2.
- Plan for reserve mil forces submitted to Chi ES staff for realistic revision. Previous plan wld have inflated MND 1953 budget far beyond prospective available revenue.
- 3.
- Principles established that ESB shall in future review budgetary matters prior to govt action.
- 4.
- Emergency meeting ESB Sept 3 approved partial pay increase described above effective Sept and increase sales prices wine, tobacco to provide needed revenue.
Emb considers these events most important development in econ sphere in many months and long step forward in US efforts to obtain realistic Chi approach to budgetary and other problems affecting econ stability. Particularly significant was education afforded Pres by Chi-US difference of view re pay increase and his apparent acceptance of principles of balanced budget and ESB review of budgetary matters prior to govt action.
[Page 96]Despatch follows.4
- Not printed.↩
- The Economic Stabilization Board, established in early 1951, consisted of Chinese officials of cabinet level, together with representatives of the ECA (later MSA) Mission, the Military Assistance Advisory Group, and the Embassy, who participated in an advisory capacity; the Board was chaired by the Governor of Taiwan Province.↩
- K.C. Wu, Governor of Taiwan Province.↩
- No despatch was sent concerning the developments reported here, but see despatch 141, Document 53.↩