793.5 MSP/9–1952

No. 53
The Chargé in the Republic of China (Jones) to the Department of State

No. 141


  • Discussion of Budget Policy and Military Program with President Chiang Kai-shek.

The Chargé d’Affaires and Major General William C. Chase, Chief, MAAG, called on President Chiang Kai-shek at his office on the morning of September 17, 1952, to discuss personally with the President the importance of the budget policy recently adopted (Embtel 230, September 5, 1952) and the progress of the Chinese armed forces during the past six months. General Chase’s report was, in essence, an oral summary of the Mid-Year Progress Report, dated July 9, 1952,1 which he submitted to the President via General Chou Chih-jou, Chief of the Chinese General Staff. (Four copies of this report were forwarded by MAAG on July 21 to the Adjutant General for distribution and one to General Olmsted, Office of Mutual Assistance, Department of Defense.) His oral presentation does not depart in any significant details from the formal report, though it brings that report up to date in some respects.

After the usual exchange of pleasantries, the Chargé d’Affaires commented as follows:

“We appreciate your taking time from your busy schedule to see us, Mr. President. The main purpose of our visit is to provide an opportunity for General Chase to report to you personally on the progress of the Chinese military forces during the past six months. I should like first, however, to make one or two brief comments on budget and economic policy.

“First, let me say, speaking for the Embassy, MSA, and MAAG, that I was very gratified to be informed recently by the foreign minister and the finance minister that you and the cabinet had definitely decided to adopt the principle of a balanced budget to apply to your operations for the last half of this fiscal year and all of the next fiscal year. This, in our view, is a great step forward.

“Under your leadership, Mr. President, Taiwan has made great progress economically during the past two years. The economy of the island has now reached the point of stabilization or at least the point where stabilization is possible if sound and wise policies are continued. This is why the balanced budget is so important. Present trends are favorable. We believe the price level can be maintained and the currency achieve general recognition as a [Page 106] sound currency if the budget is balanced, if, in other words, we do not spend money we do not have.

“One of the reasons we are so much interested in this, Mr. President, is our hope of encouraging American private investment on Taiwan. American investors are not going to invest money in any country where inflation is rampant. They are not interested in putting money anywhere and seeing its value deteriorate. But with a stable price level and a stable, sound currency on Taiwan, there is every reason for American investors to be interested. The first question a prospective investor is likely to ask is ‘Is your government budget balanced?’ For a balanced budget is one of the criteria of a sound financial position.

“There is one other phase of this matter in which you will be interested. MSA received a strong message from Mr. Harriman yesterday in which he emphasized that continuing economic aid from the United States to countries throughout the world would be dependent upon their carrying out sound economic policies. He asked for a report from Taiwan. Both Dr. Schenck and I were gratified to be able to make a favorable report on the policies of the Chinese Government which was headlined by your recent adoption of the policy of a balanced budget.”

Mr. Jones then called on General Chase, who outlined the progress achieved in the military field. He emphasized first those elements of progress which he considered worthy of commendation. Morale in the armed forces, he said, continues to be high, and the reorganization of the ground troops is continuing in a satisfactory manner. He spoke of the establishment of a National War College on U.S. lines, and President Chiang commented that he believed this to be “extremely important”. Training has as a whole been proceeding satisfactorily with the exception of the translation of U.S. training manuals into Chinese, which is still proceeding far too slowly. The President agreed that these manuals should be given a high priority. General Chase cited the cooperation of Senior Commanders, which he said was “satisfactory to excellent”, the latter particularly in the Air Force and in the Chinese Marine Corps. The cooperation of junior officers was uniformly excellent. The Marines, in Major General Chou Yu-huan, have an excellent Commandant. Intelligence training, under Colonel Lai of G–2, Ministry of National Defense, has shown great improvement.

General Chase then turned from commendation of strengths to frank criticism of weaknesses still remaining within the Chinese national defense program. The chain of command in the armed forces, he said, is weak. Too much power is held directly by the Ministry of National Defense, particularly with regard to funds and personnel. As a result unit commanders are prone to dodge responsibility. Some of this refusal to accept responsibility is due to fear of the Political Department. The chain of command is at its [Page 107] weakest in the Navy, where senior officers do not even appear particularly interested in going to sea with the units they command. The most effective chain of command is in the Air Force.

The General then took up the problem of cooperation and teamwork. Although this is improving at lower levels, as between the infantry, tanks, artillery, and signal corps, there is still much to be desired with regard to teamwork among the four principal services. A start has been made toward improvement, however. An air-ground training school will be a “going concern” shortly, and the removal of Chinese Naval Headquarters from Kaohsiung to Taipei should help.

General Chase was also critical of staff procedure, particularly with reference to the Political Department, whose officers in many instances carry on general staff functions. He said political officers are not trained to perform general staff duties and are incompetent to do so. President Chiang asked for concrete examples of interference by political officers with staff procedure. General Chase cited several. He said that U.S. staff methods are being taught in service schools here, but they must be put into practice, not just taught. For example, commanders should have the authority to reassign officers, which is still being handled entirely at the Ministry of National Defense level.

Maintenance is also still unsatisfactory. Parts and tools are in short supply and also trained mechanics. But this does not excuse commanding officers from their current tendency to refuse to take responsibility for maintenance. General Chase urged stronger command support to keep the “hardware” we are delivering in good condition.

The General turned next to the sloppy budget procedure within the Ministry of National Defense and their failure to live up even to the Chinese Government’s budget procedure requirements. He said there had been some slight improvement, but pointed to the recent unauthorized construction of air raid shelters and the extensive barrack-building program at Feng Shan for ROTC students. MAAG’s refusal to support the Ministry’s excessively ambitious reserve program—beyond a top limit of 10,000 men yearly—was based largely on budgetary considerations.

General Chase concluded his presentation succinctly as follows:

He appreciated the cooperation which MAAG has been receiving from the Chinese, and he said he was urging the speedup of U.S. matériel deliveries.
He asked for strong command support from the President to achieve the following ends:
Decentralization of authority from the Ministry of National Defense to the Army, the Navy, and the Air Force.
Strengthening of the chain of command.
Making subordinate commanders strictly responsible for maintenance.
Complete compliance by the Ministry of National Defense with the budgetary procedures approved by the Economic Stabilization Board and the Executive Yuan.
MAAG will continue to help in every way. Its basic aim is to increase the combat efficiency of the Chinese armed forces.

President Chiang, commenting on General Chase’s remarks, said that apparently the two biggest problems were the lack of responsibility on the part of commanding officers and the conflict between the Political Department and the command channel. General Chase agreed.

The Gimo then discussed at some length the military history of China, emphasizing that it is impossible to apply the same standard of measurement to Chinese officers and American officers, due to the difference in their background, education and military tradition. The Chinese officer has been accustomed to considering his army unit as his own personal property, he emphasized, and this was one of the factors contributing to the loss of the mainland. A Chinese commander assigned to an area would consider his army and the resources of that area as his own and proceed to build up a little province for himself. The growth of war lords in China was the product of this attitude and the reason for its continuance. China was a large country and the government had little direct contact with the commander.

The political workers in the army were appointed by the local commander, hence they had no loyalty to the government but only to the commander, he said. On Taiwan he had determined to remedy this situation. The political officer would be responsible to the government, not to the commander. He would be independent of the commander. To ensure loyalty and remove any fear the political worker might have of reporting disloyalty even in high ranking officers, he had appointed his own son (Chiang Ching-kuo) head of this organization so that its officers might know they would be in no danger if they reported information derogatory to some strong commander.

He recognized the problems of command that General Chase had brought out, but he felt very strongly on the subject of the necessity for keeping the political organization independent of command.

General Chase said in his opinion educational background was not too important, that a commander must accept responsibility for his unit and for carrying out orders delivered to him. He recognized that China was different from America but insisted that there must be some Chinese solution to this problem. His job was [Page 109] to develop combat efficiency in the Chinese military forces, he pointed out. The weakness in the chain of command was interfering with that objective. He therefore felt it his duty to inform the President so that he might consider the problem and work out a solution which might well be a Chinese rather than an American solution.

The President thanked us for the frank and helpful presentation and indicated he would follow up promptly on the questions raised. During the entire conversation he had personally taken notes, although General Chou Chih-jou, Chief of the General Staff, was also present—the only other person present aside from the President’s interpreter.

I was subsequently informed today by the Foreign Minister that the President had called a meeting the same afternoon of the top military leaders and had gone over the ground, item by item, that had been discussed by General Chase.

Howard P. Jones
  1. Not printed.