893.51/8–2146
Memorandum of Conversation, by the Director of the Office of Financial and Development Policy (Ness)
| Participants: | Dr. Wang Shou-Chin, Chinese Purchasing Mission |
| Messrs. Clayton and Ness, Department of State |
Dr. Wang, of the Chinese Purchasing Mission, called by appointment on August 21 to discuss with Mr. Clayton and Mr. Ness some general problems involved in China’s economic rehabilitation and reconstruction.
Dr. Wang first outlined, as follows, the resources upon which China has counted for its rehabilitation and reconstruction: (1) UNRRA assistance, (2) surplus property, in which he included lend-lease and ships-sales acquisitions, (3) reparations, (4) credit, largely in the United States, and (5) the use of its own monetary resources.
[Page 1000]Dr. Wang expressed judgments concerning each of these categories. All such judgments tended to the conclusion that China’s earlier hopes were due for partial disappointment. With respect to UNRRA, for example, he said that while as good a job as might have been expected had been done, it was only in food and cotton deliveries that the program could be said to have been successful. Mr. Clayton observed that the amount budgeted for China exceeded that of any other country, to which Dr. Wang’s reply was that apart from the two classes mentioned above the goods which had been provided for China could have been better selected if attention had been given to the particular circumstances of the Chinese economy.
Dr. Wang considered next the surplus property program, expressing the judgment that on the whole it could be described as a truck-supply program. He observed that while trucks were necessary, the amount of money involved could have been spent with far greater effect on railway rehabilitation. He pointed to two aspects of the matter: (1) China had under this program of supply incurred certain obligations, which might weigh heavily upon it in the future; and (2) in appraising over-all financial assistance to China, regard should be had for the fact that the goods secured were in one sense “tied” and that a greater contribution to China’s wellbeing could have been accomplished if an equal amount of funds had been available for the free choice of the Chinese. (It may be observed that Dr. Wang was acquainted with the fact that the NAC, in passing recently upon Maritime Commission ship sales, had attached particular provisions to the Chinese item.)
Dr. Wang expressed the opinion that the amount of reparations received from Japan would be disappointing. He pointed to Chinese devastation in the hands of the Japanese, and expressed concern that in the end Japan would be left in a better position than China itself. To this, Mr. Clayton observed that the United States Government has a special responsibility in Japan, and that unless regard be had for a minimum of working economy in that country either of two consequences will ensue: (1) millions of Japanese will starve or (2) this Government will have to continue its present costly support of the Japanese. He added that in his opinion any reparations which could be paid by Japan should go to China.
Finally, Dr. Wang reported that it had been necessary for the Chinese to draw upon their own monetary resources to a considerable extent, particularly because the credit facilities upon which reliance had been placed had not in fact been forthcoming. He mentioned that $60 million credit had been obtained in Canada, but went on to report more particularly upon his experience with the Eximbank.
[Page 1001]In speaking of this Export-Import Bank experience, Dr. Wang drew a distinction between two types of credit. The first comprehended the four credits granted to China this last February in the aggregate amount of $33 million. These, he asserted, had not yet been made available to the Chinese, although contract negotiations had been completed for two of them. He objected to the length of time involved, urging in this as in the whole of his conversation that time is crucial in the Chinese case. At Mr. Clayton’s suggestion, Mr. Ness undertook to make an appointment with Dr. Wang to consider this delay.
Dr. Wang then turned to the $500 million “commitment in principal” of last April. He was highly critical of the requirement that use of this credit be restricted to specific projects approved by the Bank, arguing that in the process of making an application so much time was lost in securing satisfaction on the two sides that there seemed no prospect of utilizing more than a small fraction of the whole credit within the period for which it was established. He said China would not wish to have a “blank check”, but urged more tolerance on the part of the Bank in project description. Mr. Clayton pointed out, however, that this practice was quite consistent with the Bank’s ordinary policy, and that it should not prove onerous inasmuch as the borrowing government would in any case have to have plans and specifications before it could hope to go on with any given project. Dr. Wang then pointed out that he had been turned down on four consecutive applications, including one for a cement plant in Formosa and one for an oil refinery. He said that in each case specifications were available in the form of Japanese-prepared blue prints, but that the projects had been turned down nonetheless. Mr. Clayton indicated his opinion that such a project as one for the rehabilitation and reconstruction of a cement plant would seem to him unobjectionable, and asked Mr. Ness to inquire further into the matter before meeting with Mr. Wang at the conference to which reference has been made above.