794A.5 MAP/6–3051: Telegram
The Chargé in the Republic of China (Rankin) to the Secretary of State
1803. Deptel 1389, June 22 re Chi mil expenditures has been under careful study with fol consideration in mind.
- 1.
- While US officials here are persuaded Chi mil expenditures are in fact not satisfactorily planned or controlled it is also true such expenditures are extremely low in terms size mil estab. As MAAG probes more deeply into situation it probable that necessity larger [Page 1723] expenditures local currency will be established. Already increased pay and retirement benefits have been recommended by MAAG which everyone agrees essential to morale and efficiency. Question therefore arises whether until further studies made and US aid funds for FY 1952 actually appropriated how far possible go in establishing firm budgets.
- 2.
- Aide-mémoire as drafted formally recognizes degree US responsibility decisively greater than before. This may be only recognition actual situation but again might be affected by amount Congress appropriates for FY 1952.
- 3.
- Aide-mémoire correctly recognizes problems mil and civil expenditures as inseparable from standpoint any effective over-all financial control.
- 4.
- Satisfactory experience recent months with econ stability and in obtaining cooperation Chi Govt other fields suggests most effective approach present case wld be ask them propose method bringing about desired control without directly requesting joint participation. Their proposals most certainly wld include suggestion of joint participation and if not this cld be assured in subsequent discussions. This wld involve only minor changes wording aide-mémoire but believed important. Chi officials wld ask US reps for informal proposals in any event and I have suggested ECA consider practicability estab small Sino-US Currency Comite. This comite wld have final say in any new issues currency and govt obligations; it cld be offshoot of ESB.
On basis foregoing and assuming implications new US responsibility fully accepted fol re-draft aide-mémoire is proposed:
“The United States Government is engaged currently in developing programs of economic and mil assistance for Formosa and other areas in the Far East. The United States Government cannot, however, go forward with the prospect of successful implementation of the program for Formosa without assurances that the Govt of Chi will cooperate effectively in bringing its mil and civilian expenditures on the island under planned control. Therefore, the United States Government requests as a matter of urgency that the Govt of Chi formulate and propose for urgent considerations by, and discussion with, representatives of the Govt of the United States some practical procedure to accomplish this purpose. Such procedure wld assure that effective supervision and control is exercised continuously over budgeting and expenditure of resources and funds in Formosa available to the Natl Govt of Chi and to all divisions of govt, Provincial and Local, for the support of the mil estab and the civilian economy. Efficient implementation of United States economic and mil assistance programs depends, we believe, upon promptly working out the arrangements referred to above; they are a precondition for efficient application of [Page 1724] those maximum efforts which are required to achieve a healthy econ, social and political environment on Formosa and the capability for successful military defense.”
Moyer and Chase concur.