DEPARTMENT OF STATE THE SECRETARY
(Secretary's Notes for meeting with Republican Congressmen at the House Ways and Means Committee on the letter they addressed to the Secretary re China policy. Meeting 2/24/49.)
1. Reasons for meeting - In present state of negotiations no service in revealing story of gross incompetence.
2. U.S. policy toward China - Independent - united - stable China; domination by any other power, hostile to our interests.
Traditional view - John Hay's open door Nine Power Treaty of 1922. Actions leading up to Pearl Harbor. Relinquished extra ________ in 1943. Permanent member of SC & UN. Fought the war in the East by reason of supporting this policy.
3. U.S. aid to China (a) After the war in which China rec'd direct military aid, and $1.5 billion in cash & property
It received -
(b) Completion of equipment and training of 39 divisions Army, Navy and Air training missions; $2 billion, half milita ry/half economic; $1 billion cost value of surplus property for $232 million; large military supplies "abandoned" by t he Marines to Nationalists.
Equaled 50% of Gov. expenditures -
(c) Landed marines in 1945-1946 and evacuated 3 million Japanese - kept railways and mines open
(d) Airlifted and supplied 4 _________ in Manchuria.
4. Other assistance China received often said that much of arms of 700,000 Jap troops in Manchuria went to Communists. Perhaps - Probably.
But China received in addition of our great transfers The arms of 1,235,000 Japs in China and 78,000 ____________ 2,015,000 Also received Jap productive property worth $3.6 billion.
Ended war with largest official holdings of foreign exchange ever held: $900 million.
5. Military situation in China -
On V.J. Day Gov. had overwhelming military ________ superiority. Great bulk of people and resources under its control. Much larger and better equipped army, probably about 5 to 1. Air Force - C's had none Small navy - " " ". But gov. had the more difficult military problem. In Manchuria USSR delayed withdrawal first at Chinese request. Later in way which aided Communists USSR made difficulties about use of ports - we flew the armies in
But - in a nutshell - any attempt to solve by force Gov. must fight on exterior lines - with long lines of communication against forces which would not offer battle except on their own terms, whose purpose was attrition.
Unanimous opinion of Amer. advisors was Gov. did not have forces or resources to do it.
To attempt it would destroy country.
6, Attempts at Peaceful Settlement.
After VJ day negotiations - intermittent since 1937 - resumed between Gov. ____ Agreement to convene Political Consultative Conference to include other parties as well.
Progress announcement in _________ �45.
List of delegates agreed upon and published in Nov.
Meanwhile fighting was spreading among Gov. & Comm. Forces in the field.
This was situation when Gen. Marshall arrived at year end. He did not come with a plan but to assist in carrying out a Chinese plan.
His first and remarkable achievements at request of both parties was to organize cessation of hostilities.
Political Consultative Conference met and adopted plans providing for
1) National Assembly to write constitution for all parts of country.
2) An interim Gov. in which all parties and groups would have representation.
Result widely acclaimed in China. Great problem was integration of armed forces. At request Gen. Marshall worked out a plan largely accepted. Again stress. Not Marshall's but Chinese idea. Interim Gov. of same sort in Norway, France, Belgium, Denmark, Italy Risks in every course. Risks in civil war were greater.
7. Resort to Force.
a) During latter half 1945 increasing insistence among Nationalists for solutions by Arms.
b) Marshall's reiterated insistence not within their power.
Also that war would weaken and destroy China Hostilities in violation of truce by both sides increased. In Jan. when American efforts to aid peaceful solution ended war in fact. In July Chinese Gov. proclaimed it.
7) Debacle -
Never was judgment more swiftly confirmed than Marshall's. By end of 1947 China's foreign exchange down from 900 to 200 million. Foolish policy of subsidizing imports. Military operations absorbed 70% of Gov. outlay. Armies lived by direct requisition ________________. Much of expenditure wasted by incompetent and unscrupulous commanders and in maintenance of garrisons in points of little importance. The economy deteriorated and inflation grew by corrupt practices by _______ much of tax collections never reached Treasury. In 1948 the military disaster became complete. All of Manchuria and China north of the Yangtze were lost. In the last 3 months the Gov. has lost 44 armies totaling a million men. Believe 80-90% of all American equipment furnished since 1941 many times lost much of this equipment. We have become principal supplier of Communists. Black Markets. General Barr's telegram - Complete lack of will to fight and faith in Gimo gov. Also U.S. support of Gov. almost as unpopular in Nat. China as in Comm. Prolongs war which cannot be won. Have been at war since 1931 and off and on since 1911.
Conclusion
No amount of monetary aid with or without military advice can help so discredited and inefficient an outfit. Gimo has lost confidence of all groups. He is still pulling wires behind the scenes. The social and political revolution which has torn China is moving into another phase. The Kuomintang no longer revolutionary party. Lost its dynamism and drive. Corrupt reactionary Communists have been quick to exploit this. Seek to identify themselves with reform and peace. Thus again - and for a time - the middle of road view is crowded out. China and U.S. have suffered serious reverse. No desire to minimize but not to exaggerate. China not a modern centralized state. "Communists" not taking over China. No Gov. - no transport, no communications. Few resources compared to popular _______ Ignorance - inertia. China not a springboard for attack. A morass. Our policy is the same; independent until stable China. It is further away than we thought three years ago. We cannot tell what the next step is until some of the dust and smoke of the disaster clears away and we can see where there is a foundation on which to build.