Foreign Relations of the United States Diplomatic Papers, 1941, The Far East, Volume V

893.24/1124

Memorandum Prepared in the Division of Far Eastern Affairs⁷⁷

[Washington,] May 29, 1941.

The American Policy of Aiding China and Technical Problems of Methods and Means

There has recently been brought informally to the attention of the Department a letter addressed on May 8, 1941 by the Assistant Director of Purchases of the Office of Production Management⁷⁸ to the Director of Procurement of the Procurement Division of the Treasury Department.⁷⁹ In this letter certain observations are offered upon practical problems in connection with the transportation of American aid to China (including reference to the asserted inadequacy of the Burma Road for the transit into China of more than about 9,000 tons of goods per month); China’s alleged failure in the past to repay loans is mentioned; reference is made to the possibility, which it is said is understood to exist, that goods sent by this Government to China might be diverted to Japanese forces; and the conclusion is reached that this Government should weigh these circumstances carefully before disturbing in behalf of China this country’s normal economy or its military program.

Observations upon certain of the assertions contained in this letter and upon the general policy toward aid to China suggested by this letter are offered as follows:

It is the deliberate and declared policy of this Government—publicly announced by responsible officials and supported and implemented by the Congress—to extend material aid to Great Britain, China and other nations who are resisting armed attack. On December 29, 1940 the President in a radio address said:

“Democracy’s fight against world conquest is being greatly aided, and must be more greatly aided, by the rearmament of the United States and by sending every ounce and every ton of munitions and supplies that we can possibly spare to help the defenders who are in the front lines.…

“We are planning our own defense with the utmost urgency; and in its vast scale we must integrate the war needs of Britain and the other free nations resisting aggression.”⁸⁰

On January 15, 1941 the Secretary of State, in a statement before the Foreign Affairs Committee of the House of Representatives, said:

“On no other question of public policy are the people of this country so nearly unanimous and so emphatic today as they are on that of the imperative need, in our own most vital interest, to give Great Britain and other victims of attack the maximum of material aid in the shortest possible space of time.”⁸¹

On January 30, 1941 the Under Secretary of State in an address said:

“If we desire to insure that the control of the Atlantic Ocean shall not pass to unfriendly hands, and that other friendly nations like China and Greece can continue successfully to withstand the forces of world enslavement, the American people must be prepared in their own self-defense, to render all necessary assistance which America can produce.”⁸²

On March 15, 1941 the President in an address said:

“There is no longer the slightest question or doubt that the American people recognize the extreme seriousness of the present situation. That is why they have demanded, and got, a policy of unqualified, immediate, all-out aid for Britain, Greece, China and for all the governments in exile whose homelands are temporarily occupied by the aggressors.

“From now on that aid will be increased—and yet again increased—until total victory has been won.…

“China likewise expresses the magnificent will of millions of plain people to resist the dismemberment of their nation. China, through the Generalissimo, Chiang Kai-shek, asks our help. America has said that China shall have our help.

“Our country is going to be what our people have proclaimed it must be—the arsenal of democracy.

“Our country is going to play its full part.”⁸³

On April 24, 1941 the Secretary of State in an address said:

“Events have shown beyond possible question that the safety of this hemisphere and of this country calls for resistance wherever resistance will be most effective. In my judgment our safety and security require that, in accordance with the declared policy of the Legislative and Executive branches of the Government, aid must be supplied without hesitation to Great Britain and those other countries that are resisting the sweep of the general conflagration. This policy means, in practical application, that such aid must reach its destination in the shortest of time and in maximum quantity. So—ways must be found to do this.”⁸⁴

On May 27, 1941 the President in an address said:

“… We have doubled and redoubled our vast production, increasing, month by month, our material supply of tools of war for ourselves and Britain and China—and eventually for all the democracies.

“The supply of these tools will not fail—it will increase.”⁸⁵

The Congress through legislation has made provision so that such aid may be extended. The President’s assurance has been given to General Chiang Kai-shek that a wide category of goods has been allocated for shipment to China to meet China’s needs and that henceforth shipment of all such goods which can be made available will be expedited.

It is in the light of this established policy of this Government that the technical problems of methods and means in connection with sending aid to China should be viewed by all officials of the United States Government.

With reference to the question of the capacity of the Burma Road over which American supplies to China now pass, information presently available indicates that there has been a marked increase in the total monthly tonnage reaching Kunming in Yunnan Province over the road since its reopening in October 1940. In the month ending April 17 more than 10,500 tons of goods reached Kunming over the Burma Road. This figure does not measure, however, the total capacity of the road, for the volume of traffic has been restricted by a lack of trucks and spare parts and a lack of efficient management. The first need—for trucks and parts—this Government can meet and steps have already been taken in this direction. The second need—for efficient management—the Chinese Government is meeting through the appointment to superintend transport over the road of Mr. John E. Baker, an American with practical experience of transport problems and an intimate knowledge of the Chinese and of conditions in China. With the aid of trained American assistants, Mr. Baker, it is understood, is taking steps to improve both the physical condition of the road and the organization of the transport system. According to the press, Mr. Baker has estimated that the road’s potential capacity is 30,000 tons a month and that this total, if adequate supplies of trucks, et cetera, are made available, can be reached. Although the Japanese have succeeded in damaging certain of the bridges over the Burma Road from time to time through bombing operations, statistics of traffic over the road show that the bombings have not seriously interrupted the flow of goods, owing apparently to the success of the Chinese in developing a ferry system and in repairing the bridges. According to reliable technical opinion, installation of an improved ferry system will ensure that despite damage to bridges, virtually normal traffic over the road can be maintained. It is likely that the volume of American aid reaching China may be increased in the near future through the development of alternate sections of the Burma Road or alternate routes and also through the use of airplanes as freight carriers under a plan now receiving active consideration by the China National Aviation Corporation, a joint enterprise of the Chinese Government and Pan American Airways. It would seem from the information now available that material assistance to enable the Chinese effectively to assist themselves can reach the Chinese Government in steadily increasing amounts.

With regard to the suggestion that freight charges might be reduced by shipping oil to China from the Netherland East Indies rather than from the United States, the question arises whether the saving in freight rates which might be effected thereby would be worth the possible final cost of such a course of action. Since the military occupation of the Netherlands by Germany in May 1940, the Nether-land East Indies have been subject to strong economic pressure from Japan, which has been seeking to free itself from dependence upon American oil markets by obtaining from the Netherland East Indies larger supplies of oil. It is understood that the oil companies in the Netherland East Indies, while agreeing to increase the quantity of oil exported to Japan, have successfully declined to comply fully with the Japanese demands. If large quantities of oil were now to be sent to China from the Netherland East Indies while Japanese demands were refused, the possible adverse effects upon the security of the Netherland East Indies and upon the stability of the Far Eastern situation as a whole would have to be considered.

Reference is made in the letter to China’s alleged failure to meet indebtedness in the past. Although, as the President indicated at his press conference on December 17, 1940, one of the objects of the extension of aid upon a lend-lease basis was to eliminate the “dollar sign” from the transaction, and although it had not been understood that the repayment of past indebtedness was a prerequisite for obtaining such aid, it may be of interest to note China’s record for the repayment of foreign obligations. With regard to foreign obligations of the Chinese Government other than obligations to foreign governments, under a program followed by the Chinese Government under General Chiang Kai-shek’s leadership, settlement of arrears in service payments were negotiated with practically all the creditors prior to the outbreak of hostilities in July 1937, and service payments were resumed and were continued during nearly two years of hostilities. In 1939, as a result of seizure by the Japanese of the major sources of revenues upon which the foreign obligations were secured, the Chinese Government suspended full service but has since been setting aside for partial servicing of these obligations, funds equivalent to the proportion of customs, salt and railway revenues now collected in areas of China remaining under the effective control of the Chinese Government. With regard to the loans and credits which this Government has extended to China, Mr. Jesse Jones as Federal Loan Administrator was able to make the following statement on September 25, 1940:

“Of all loans heretofore authorized in China, both by the EFC and the Export-Import Bank, $43,824,528 has been disbursed and $13,160,253 repaid, with nothing past due.”⁸⁶

On November 30, 1940 in a letter to the President, which was made public, Mr. Jones stated:

“You will be interested to know that China is up to her schedule in deliveries of wood oil and tin to the United States through which method she is making payments on previous loans made against her commitment to sell us these essential materials.”⁸⁷

From the record, China’s performance in repaying foreign obligations will be found to compare favorably with that of other countries including those of more advanced economic development.

With regard to the hypothetical charge that supplies for China might be diverted to the Japanese forces, mention may be made that under the terms of the Lend-Lease Act, each foreign government receiving aid undertakes that it will not, without the consent of the President, transfer title to or possession of any articles or materials received from this Government or permit the use of such articles or materials by anyone not an officer, employee or agent of such foreign government. The Department is aware of no evidence tending to indicate that the Chinese Government has violated this obligation or would be likely so to do.

Certain of the other questions raised by the letter (such as the possibility of shipping oil to China from the West Coast instead of the East Coast of the United States, and the advisability of meeting the Chinese Government’s desire that oil be shipped to China in returnable steel drums) would not seem to present serious difficulties, if approached in a spirit of friendly accommodation of the needs of the two Governments. In connection with the question of China’s desire for returnable drums, it is understood that these containers afford a means by which tung oil in repayment of American credits is shipped to the United States. The situation with regard to zinc and lead supplies may raise special problems owing to domestic defense needs. These problems will have to be met as they arise.

It is evident that the extension of American aid to China, as to other countries resisting armed attack, involves certain technical and other problems which should be solved in the best practical manner in the light of the long-run interests of this Government. Unlike the situation with regard to the shipment of supplies to Europe, the supply of materials to China has not been subject to loss by belligerent action while crossing the ocean. As this circumstance cannot be counted upon to endure indefinitely, it would seem to be the part of wisdom to proceed as rapidly as possible with the sending of such aid to China as shall insure capacity on China’s part to continue to assist itself. The probable adverse consequences—political, military, economic, moral—of a failure on the part of this Government to live up to the pledges that it has given to China cannot be overestimated.

At present, the list of those countries outside of the Western Hemisphere which can be counted upon to resist effectively the spread of Axis forces is very brief: the British Empire, the Netherland Indies, China and possibly one or two other countries. This Government should not lightly turn aside the needs of that country which has already resisted with nearly four years of fighting and has kept Japan from giving effective assistance to her Axis allies.

In summation, it would appear that many of the assertions in regard to particular problems which are made in the letter referred to above are based on erroneous or inadequate information. The policy suggested in the letter is in direct contradiction to the policy of this Government as made known clearly and repeatedly by those officials who have authority to declare and have declared the policy of this Government.⁸⁸

77. Prepared at the suggestion of the Adviser on Political Relations (Hornbeck) as comment on certain statements contained in a letter of May 8 from the Office of Production Management to the Treasury Department (not printed) and which went “all over the Lease-Lend organization.” With an “I approve heartily” authorization from the Under Secretary of State (Welles), this memorandum was forwarded on June 2 to the Administrative Assistant to President Roosevelt (Currie), who originally had brought the letter to the attention of the Adviser on Political Relations. Copies of this memorandum were sent by the Department on June 17 to the Secretary of War (Stimson) and Secretary of the Navy (Knox), but with changes in the last paragraph as indicated in footnote 88, p. 656.
78. J. P. Sanger.
79. Clifton E. Mack.
80. Foreign Relations, Japan, 1931–1941, vol. ii, pp. 173, 179.
81. Department of State Bulletin, January 18, 1941, pp. 85, 88.
82. Ibid., February 1, 1941, pp. 123, 128.
83. Department of State Bulletin, March 15, 1941, pp. 277, 280, 281.
84. Ibid., April 26, 1941, pp. 491, 492.
85. Ibid., May 31, 1941, pp. 647, 648.
86. Foreign Relations, Japan, 1931–1941, vol. ii, p. 222.
87. Department of State Bulletin, December 7, 1940, p. 522.
88. In copies sent on June 17 to the Secretary of War (Stimson) and Secretary of the Navy (Knox), the following changes were made in the last paragraph: that part of the first sentence reading “in regard to particular problems” was omitted; a new terminal sentence was added: “The policy of this Government is to give assistance not only to Great Britain but to China and ‘this policy means, in practical application, that such aid must reach its destination in the shortest of time and in maximum quantity’, as declared by the highest officials of the Administration.” (893.24/1127a) Replying, the Secretary of War on June 23 assured the Under Secretary of State that “the War Department will do its utmost, consistent with our own defense and our other commitments, to conform fully to our established national policy of aiding China,” (893.24/1128)