261. Telegram From the Embassy in the Republic of China to the Department of State0

927. Draper group1 which has now been in Taiwan for two and a half days visited South Taiwan today to inspect Army, Navy, Air and economic [Page 529]developments. Group together with Admiral Smoot, General Doan, myself and others had lunch with Gimo who has been staying in Kaohsiung area past three weeks. Prior to visiting with Gimo Mr. Draper and I discussed subjects which might carefully be brought up with Gimo.

Accordingly, General Hull spoke frankly on need for elimination of ineffectives and general reduction of forces. He advanced view that Chinese forces would be more effective if GRC got away from idea of mass forces and introduced “crack forces” concept. In reply Gimo observed that with US assistance total of 80,000 ineffective men had been eliminated and GRC now in process of retiring 24,000 officers. Gimo said this program could not have been carried out without US assistance. He said GRC is planning further cut within next 18 months of some 12 percent of existing force or a total of about 70,000. But this cut would depend upon whether funds are available for this purpose. Gimo requested that this information be kept confidential pending further study and public release by GRC. Pointing out that existing reductions have been substantial, Gimo expressed view this is best investment US has made in Taiwan.

Comment: It was clear from Gimo’s statement that he is willing to make further reduction to about 600,000 if US will assist and might be willing to reduce even further at later date.

After outlining purpose of mission and suggesting that less money may be available in future years for military support, Draper discussed following points: (1) He had been told that during past few years inflationary tendencies had been under control, but recent rise in currency issue by one third indicated lessening of control. He then pointed out that once started inflation is hard to control and urged tightest restrictive measures. (2) He stressed importance of expanding exports and pointed to Germany and Japan as examples of states which had risen from ashes to prosperity through extended exports. He noted GRC exports cover only two thirds of imports, commended GRC for its progress and suggested special effort be made to increase them further. (3) He expressed concern over population growth which he had been told now exceeds three and one half percent and is catching up with GNP. Referring to example of Japan, he urged this matter be given serious thought here where limit to expansion of land resources and food production already arrived. He suggested GRC consider birth control educational work, concluding that population growth may be [omission in the source text?] all of Taiwan’s problems. In reply Gimo merely observed that Draper’s observations were very true and important. (4) He urged greater fostering of private enterprise, saying this could contribute materially to prosperity of Taiwan.

Gimo expressed his deep appreciation for steady US help and support of past six and one half years. He said this had laid foundation for stable Taiwan. He also said he was grateful for quick and effective support [Page 530]given by US in off-shore island crisis of last fall. He appreciated both material and moral assistance provided by US. He said he agreed with Draper that most serious problems are economic. He hoped that Draper’s visit would give US Government deep understanding and insight of problems. He agreed that money expansion creates problem. He said this was due to heavy load imposed on GRC to maintain strong military posture. He assured Draper he would do everything possible to control inflationary danger but said he must at same time look to US for proportionately greater help in relation to grants made to other countries in this area (Korea and Viet-Nam). With this proportionately greater help the Gimo said GRC could keep situation under control. In this connection Gimo said he was aware that the US economic aid to Taiwan for FY 59 had increased slightly whereas in other areas there had been cuts. He was grateful for this but believed GRC should receive larger proportion of amounts granted to main recipient countries in Far East. He said there is no waste in Taiwan and every effort is made to stretch one dollar into two dollars of value.

In closing conversation Gimo told Draper he was happy to say US representatives in Taiwan had kept fully abreast of situation and that this had produced close cooperation between two governments.

I got impression that Draper made big hit with Gimo in spite of candor and that this conversation might be useful in helping shape up future programs here. Admiral Smoot, General Doan and I have had conversations with Draper and General Hull which will probably result in Draper’s making some concrete suggestions for future courses of action here after his return to US early next week.2

  1. Source: Department of State, Central Files, 793.5–MSP/2–1359. Secret; Limit Distribution. Transmitted in two sections. Received at 9:17 a.m. Repeated to CINCPAC.
  2. William H. Draper, Jr., chairman of the President’s Committee To Study the U.S. Military Assistance Program, headed a subcommittee that visited Taiwan February 11–14. Telegram 942 from Taipei, February 19, transmitted a summary report of the visit. (Ibid., 793.5–MSP/2–1959; see Supplement)
  3. The Draper Committee issued a public report entitled Composite Report of the President’s Committee To Study the United States Military Assistance Program, 2 vols. (Washington, August 17, 1959).