Foreign Relations of the United States, 1949, The Far East: China, Volume IX

893.50 Recovery/8–1549

The Chinese Ambassador (Koo) to the Secretary of State ⁹⁴

Memorandum on Proposed Military Aid Program From U.S.A. for China

I. Purpose of the Program

The object of the proposed program of military assistance is to provide the National Government of China with the most essential military supplies and services so as to enable its armed forces to continue their fight against the Communist aggression. It is of especial importance that the advance of the Communist armies in the areas which are still under the control of the Government should be stopped. The object is also to provide time for the establishment and consolidation, pursuant to a long-range plan, of bases of operation for the progressive re-occupation of the territories now under Communist control. The present program is, therefore, of a short-term character, and covers a period of six months beginning from September 1949. The cost of the program is estimated at $287,000,000, with the following breakdown:

1.	Military materials for the Chinese Army	$150,000,000
	(a) Weapons and ammunition $109,800,000 (b) Others 40,200,000
2.	Military materials for the Chinese Navy	22,000,000
3.	Military materials for the Chinese Air Force	55,000,000
4.	U.S. dollar costs of silver currency in meeting a portion of the pay and subsistence expense for Chinese troops	50,000,000
5.	U.S. dollar expenditures for services of U.S. personnel	10,000,000
	Total	$287,000,000

The Chinese Government today still controls a vast integral territory, including the entire hinterland extending from the Provinces of Suiyuan and Ninghsia in the Northwest down to the Province of Kwangtung in the South of China. In addition, it still holds parts of the Province of Shensi in the North and Hunan, Kiangsi and Fukien in the South as active theaters of fighting. This territory is separated from the great plains of North, Central and East China by a number of mountain ranges and exceedingly rugged terrains and is advantageous for purposes of defense. It constitutes a large base for operations against the Communists. Generally speaking, it was in these chains of mountains that the Japanese army was successfully stopped at the peak of World War II. The whole territory under the control of the Chinese Government today is larger than it held after the Japanese invaders penetrated deep into the interior in 1944. Furthermore, there are the islands of Taiwan and Hainan, which are invaluable to the Government as bases of supply and operations.

Experience gained in the course of the war against Japan indicates that these regions are reasonably sufficient in resources to provide a minimum of the necessaries of life for the people. During the last war, an industrial basis, though limited, was built up in these regions capable of meeting a number of special war needs. The people in these provinces are hardy and industrious. They constitute a reservoir of man-power from which most of the troops of the Chinese Army have been recruited. This means that the Government troops are now fighting on their home soil.

The anticipated zones of operation, though a matter of necessity rather than of choice, offer a measure of advantage on account of their mountainous terrain. When properly defended, they also form a barrier against the Communist advance to the south in the direction of China’s neighbors.

II. Requirements of the Chinese Army

The Chinese Army Ground Forces now consist of ninety-four (94) divisions, including those under training. Many of the divisions are not up to full strength on account of their previous losses, but those deployed in the combat zones are being brought up to strength through replacement from training centers in Taiwan, Szechwan and elsewhere. The present aid program calls for a supply of new weapons for twenty (20) divisions, six-months’ supply of small-arms ammunition for forty (40) divisions, and moderate quantities of artillery ammunition, owing to the fact that there still remain in stock a quantity of artillery shells.

It should be added that the required supply of small arms and their ammunition is to supplement the production of Chinese arsenals.

The total amount of military materials required in this program for the Chinese Army is estimated at $150,000,000. Of this sum, $109,800,000, or 70%, is for weapons and ammunition. The cost of weapons and ammunition are calculated on the basis of the 1945 SNL⁹⁵ prices. In the event that a substantial portion of such items could be made available from United States surplus stocks at reduced prices, there would be a reduction in the estimate.

The balance of the Chinese Army requirements, amounting to $40,200,000, consists of supplies for the various other services of the Army Ground Forces, such as petroleum products, materials for the arsenals and for the transportation, signal, medical, quartermaster, engineers, and armored corps. With due account taken of the needs for the next six months, and the present stocks, including the supplies procured with the $125 million China Aid funds, the apportionment of this balance is as follows:

1.	Arsenal raw materials	$8,000,000
2.	Petroleum products	8,500,000
3.	Transportation—vehicles, parts, etc.	9,100,000
4.	Armored Force—spare parts and tools	2,400,000
5.	Signal—equipment and supplies	4,500,000
6.	Medical—equipment and supplies	4,500,000
7.	Quartermaster—supplies	2,000,000
8.	Engineers—equipment and supplies	1,200,000
	Total	$40,200,000

Further details of the requirements of the Army Ground Forces Program are given in Appendix I.⁹⁶

III. Requirements of the Chinese Air Force

The first-line strength of the Chinese Air Force has been on the basis of Eight and One-third Groups as follows:

1. Four (4) fighter groups

2. Two (2) transport groups

3. One (1) heavy bomber group

4. One (1) medium bomber group

5. One (1) reconnaissance squadron

The present program is to provide for the maintenance of such a strength for a six-month period.

The proposed amount for the requirements of the Chinese Air Force under this program is estimated at $55,000,000, with the following breakdown:

1.	Aircraft, parts and accessories	$43,705,000
2.	Petroleum products	5,587,000
3.	Bombs and ammunition	5,708,000
	Total	$55,000,000

The amount required is calculated on the basis of the World War II U.S. standard prices. If surplus equipment and materials are available at lower prices, there would be a reduction in the dollar cost of the program.

Further details of the Air Force Program are given in Appendix II.⁹⁸

IV. Requirements of the Chinese Navy

At present the Chinese Navy has three squadrons in active service, consisting of three destroyers, six destroyer escorts, thirty-four landing ships and crafts and seven transports with a number of minesweepers, gunboats and auxiliary ships. Allocations from the special grant under the China Aid Act of 1948 have enabled the Chinese Navy to keep its ships in good condition. To maintain these ships in operable condition and to enable them to discharge their duties with efficiency, it is estimated that the program for the Chinese Navy would require $22,000,000, with the following breakdown:

1.	Weapons and ammunition	$11,112,500
2.	Petroleum products	3,500,000
3.	Ship outfittings and accessories	1,081,000
4.	Repair and construction materials	1,206,500
5.	Ship engine spare parts	1,500,000
6.	Signal equipment and parts	3,400,000
7.	Medical supplies	200,000
	Total	$22,000,000

Further details of the Navy Program are given in Appendix III.⁹⁸

V. Need of paying the troops with silver dollars to raise their morale

In addition to the purely military supplies for the three branches of the armed services as indicated above, there is an essential need of silver dollars with which to pay the combat forces and to provide for their provisions. Experience has shown that payment in hard currency has greatly increased their fighting spirit as was evident in the battle of Shanghai last May. This emergency measure of paying the troops in silver is therefore as important as the supply of weapons and ammunition.

The present monthly budget of the Government is estimated at 45 million silver dollars, of which amount the pay and provisions for the troops require about 30 million silver dollars. Because of the striking drop of revenues as a result of the changed situation, the monthly deficit is between 30–35 million silver dollars. The Government has been meeting this deficit by drawing upon its limited foreign exchange reserves. This budgetary situation is explained more fully in the Memorandum on economic aid.⁹⁹

For the next six months, this item for the troops will amount to about 180 million silver dollars. It is equivalent to about US$108 million. In order to relieve the Chinese Government of this severe drain on its exchange reserves, it is proposed to include a little less than half of this amount, or US$50 million, as an item of military aid in this program. The resultant benefit, both material and psychological, will be great and far-reaching.

VI. Cooperation of United States representatives and other personnel

In order to ensure the effective use of the aid furnished under this program, the Chinese Government desires to secure the cooperation of United States representatives and other United States personnel for specialized services. The need of qualified experts in the various spheres of the military organization is very great and their assistance and cooperation will be most welcome. For these purposes, an amount of $10,000,000 is included in this program to meet their various expenses.

VII. Distribution of existing supplies

The existing supplies in the hands of the Chinese Government consist mainly of the remainder after issue of the supplies obtained under the $125 million China aid funds and the limited stocks of local production of the arsenals in West China.

Of the supplies under the $125 million China aid, about 85% has been shipped to China with the remaining 15% to be shipped in the near future. Of this 85% which has arrived in China, about two-thirds has already been issued to the field forces and services. As to weapons and ammunition, nearly all the weapons and about half of the ammunition have been distributed to the forces in the field.

These above-mentioned stocks form the only available reserve of supplies for the armed forces at the present time. As soon as additional supplies under the proposed program are assured, the Government will be able to proceed with the immediate distribution of these stocks for the fighting forces at the front.

Washington, August 15, 1949.

94. Transmitted in Ambassador Koo’s letter of August 15, p. 678.
95. Standard Nomenclature List.
96. Not printed.
98. Not printed.
98. Not printed.
99. Post, p. 682.