Foreign Relations of the United States, 1955–1957, China, Volume III

83. Despatch From the Ambassador in the Republic of China (Rankin) to the Department of State¹

No. 252

Taipei, October 21, 1955.

SUBJECT

• Status of Relations with China

Ambassador Rankin having returned to Taipei on October 8² and resumed charge of the Embassy, it seems opportune to attempt to assess the status of our relations with the Government of the Republic of China. It is the impression of the Reporting Officer that a deterioration of those relations occurred during the summer. If so, the fault can scarcely lie entirely with the Chinese, and it seems appropriate to review these events to ascertain precisely what did occur, what might have been done differently, and prospects for the future.

Overall Situation

As for the overall situation, some observers of the local scene believe that the cordiality of Chinese-American relations began to lose its fresh bloom approximately a year ago. While most senior officials, and most thinking Chinese, had at least subconsciously realized that the United States was not going to assist the Chinese Government in its objective of return to the mainland under present conditions, this feeling had been unmentioned, inchoate, and intangible. The signing of the Mutual Defense Treaty, however, brought the facts into focus, and made it clear that we were not willing to accept this objective, nor to commit ourselves to support it in writing. Our failure—indeed our refusal—to include such a commitment in the Treaty itself made our reluctance only too evident. It thus began to become more widely apparent that Chinese and American policies were beginning to diverge.

It is not startling that such a divergence of interests should occur; such a development was in fact inevitable. As was mentioned in the final paragraph of the Embassy’s secret despatch number 399 of February 3, 1953,³ the basic decision was whether Formosa should be considered simply a strategically important island which should be denied to the Communists, or an important factor which could be helped to play a significant part in the eventual liberation of mainland China from Communist rule. Emphasis on the latter possibility would bring Chinese and American policies more closely into line. The trend of today, however, at least on the surface—with references to a renunciation of the use of force in the Formosa Strait, to the new “Geneva atmosphere”, etc, seems more toward the former alternative, which is not and cannot be acceptable to the present Government of the Republic of China.

Furthermore, the tides of history seem to be ebbing slowly away from, and even turning against, the Nationalist Government. More and more countries are moving towards recognition of the Peking regime, not only Arab countries like Syria, but also—apparently—Canada, Belgium, France and Italy.

If the United States is not to be left in isolation, it will have to make some concessions to these developments, in the next few years, however unwelcome the changes may be to our own people and principles. And any such steps toward accommodation with the Chinese Communists are bound to widen the small gap which is already visible between us and the Nationalist Government on Taiwan.

Military Aspects

This incipient tendency toward a split took on both practical form and urgency, in mid-summer 1955, primarily because of developments in the military field. First, the three senior officers of MAAG were replaced simultaneously, with a loss of continuity and of the personal relationships so important in China. Second, the atmosphere in the Pentagon underwent a change and hardened, judged by communications received in Taipei. Third, the nine-reserve-division plan was approved by the Joint Chiefs of Staff only with certain changes which turned out to be highly unpalatable to the Chinese. This chain of events built up into the primary source of friction with the Chinese Government; but there were other contributing factors in both the military and economic fields, as will be mentioned.

[Here follows a detailed discussion of the three developments.]

The Geneva Conference, and Talks

Another evidence of diverging national policies came with the announcement of the top level Geneva conference. The Chinese complaints usually centered around fears that China was being subjected, or was about to be subjected, to another Yalta “sell-out” (as the Chinese consider it). However, after some initial grumbling this development was accepted with fairly good grace.

When, however, at the end of the Summit meeting, it was announced that the United States was to conduct conversations with the Red Chinese at the Ambassadorial level, Chinese indignation became acute. Here was further evidence of a basic divergency in policy. Any conversations with the Red Chinese gave them prestige and indicated their acceptance as a member of the international family. These could only be gained by Communist China at the expense of Nationalist China. The press editorials became more and more bitterly resentful, despite the assurances in advance which had been given to the Chinese Foreign Minister, and later announced publicly, that we would not at Geneva discuss anything contrary to the rights, claims or interests of the Nationalist Government, but would limit ourselves to matters of bilateral interest. The newspaper campaign became shriller and shriller till at last the Foreign Minister himself asked the American Chargé d’Affaires to hold a press conference and try to calm public indignation. This was done and while it occasioned one critical editorial in Hong Kong, it seemed to have the desired effect locally. Criticism continued, but became less emotional. Suspicion also persisted, although there were also professions of confidence in America’s fulfillment of its oral promises. Nevertheless, many Chinese continued to feel that the United States had again sold China down the river; or was about to do so. (This attitude of uncertainty still exists.)

This was the main stream of developments which tended to sour Chinese-American relations during the summer of 1955. However, there were a number of contributory streams, both military and civilian, which fed the main river of events. The military influences included the occurrences at the Peitou military conference, the effort to have the 70,000 ineffectives removed from the Chinese armed forces and placed on the FOA (later ICA) payroll; and possibly the Sun Li-jen case. These are treated in detail below.

[Here follows a detailed discussion of military and economic contributing factors.]

Symptoms

These were the factors and developments which contributed to the deterioration of relations. The symptoms which appear to establish that such a deterioration has taken place, are almost too numerous to mention. They fall, of course, in both the civilian and military fields. In the military field, MAAG advice has been increasingly ignored. The military budget was approved with insufficient regard to MAAG’s recommendations. When it was reviewed in an attempt to make reductions, MAAG found places where approximately NT$127 million could be cut. These matters came before the 59th meeting of the Economic Stabilization Board and apparently too much frankness crept into the preparation and translation of the papers, for one of them bore the notation that three items of expenditure, totaling NT$14 million, had been approved by the Executive Yuan and would be made “with or without MAAG agreement.”

Naturally, MAAG advice is not always going to be accepted; it is only advice. At the same time, if all or the great majority of MAAG’s advice is either rejected, ignored, or sabotaged in fact, then it can scarcely be denied that our relations with the Chinese Government have deteriorated from the level of loyal and free cooperation which previously existed. A number of responsible MAAG officers have expressed themselves in private as believing this to be the case. The Chinese G–3 who worked in close collaboration with the Americans of the Army Section MAAG suddenly disappeared. MAAG inquiries elicited the fact that he had been transferred, but there was no indication as to where he had gone or why he had been moved. His replacement either speaks no English or has been instructed not to carry on his business in that language.

Officials of the ICA Mission are equally convinced that there has been a deterioration of their relations. The principal area where this has been demonstrated has been in connection with the budget. P. Y. Hsu, the Minister of Finance, produced a budget which was far out of balance. As a result of the third recalculation, he has now apparently brought the deficit down to a manageable figure. Nevertheless, ICA points out that this is done through the juggling of figures, and by milking government-owned enterprises to such a degree that they will have to increase their bank loans, thereby adding to inflation. With one breath the Finance Minister has announced that there will be no increase of taxation; with the next breath he has prided himself that the level of taxation on Taiwan is only 14% of national income, or among the lowest in the world. While this 14% is undoubtedly a considerable burden to the individual Chinese taxpayer, it is not much consolation to Americans who are paying considerably more in income tax alone. The Chinese military budget ceiling, which was conceived of as an upper limit, and accepted as such by the military, has now become a floor and there are repeated demands for increases in authorized military expenditures, regardless of whether revenue therefor is available or not.

Outlook

The situation is neither desperate, nor irremediable. JCS and CINCPAC have given a tentative indication of willingness to relax the stringent requirements imposed on the nine-division-reserve program—and doubtless a compromise solution can be found, especially as the Chinese are now also showing some resiliency (the Minister of Defense states that he has ordered the recapture of certain diverted MDAP equipment). Similar changes of attitude, coupled with patience and understanding on our part, can reduce the other national differences to manageable proportions. Yet because of the Chinese aversion to the Geneva atmosphere, their opposition to any renunciation of the use of force in the Formosa Strait, their dislike and fear of the “two Chinas” theory, and their sensing of a world-historical trend contrary to their interests, differences of objectives will remain and probably grow wider. The Chinese will probably be less amenable to suggestions and persuasion in the future, than in the past when they felt we walked really together, and in the same direction. It will require our best skill to ameliorate the effects of these divergencies.

Conclusion

1. Assumptions:

a) We must keep Taiwan out of Red China’s hands.

b) We must assist the GRC in developing and maintaining the most effective combat forces possible.

c) We must assist in developing the GRC on Taiwan as an acceptable alternative to the mainland Communist regime.

But all these should be done with our eyes open.

2. Conclusions:

a) Cooperation is a two-way street.

b) Consequently, since both Washington-Honolulu, and the Chinese military, have made gestures towards a relaxation in their positions, the door is now open to an improvement in relations with China.

c) Because of basic and slowly widening divergencies of aims and interests, there will be more differences of approach and interests in the future, than in the past.

For the Ambassador:

William P. Cochran, Jr.
Counselor of Embassy

1. Source: Department of State, Central Files, 611.93/10–2155. Secret. Drafted by Cochran. A note on the source text reads: “Distribution limited to Department of State.”
2. Rankin was on home leave June 21–October 8.
3. Portions of despatch 399, including the final paragraph, are printed in Karl Lott Rankin, China Assignment (Seattle: University of Washington Press, 1964), pp. 150–154. (Department of State, Central Files, 793.00/2–353)