5-496 To Paul V. McNutt, July 5, 1946

Publisher: The Johns Hopkins University Press
Date: July 5, 1946

Subject: China

To Paul V. McNutt1

July 5, 1946 Radio No. GOLD 1052. [Nanking, China]

Confidential, Eyes Only

Dear McNutt:

FLC is about to consummate a contract for the transfer of surplus property in the Pacific area to China.2 I understand you have some objection against selling surpluses in the Philippines to China and against Chinese labor coming into the Philippines to pack and prepare surpluses for outloading because of the local unemployment problem.

There could be no question in my mind but that the interests of the Philippine people must come first, but it would appear that under the proposed contract the interests of the Philippine Government under the Tidings Act will be fully protected. The contract, as I understand it, will not adversely affect Philippine purchases of surplus property up to the $100,000,000 limit allocated by the Tidings Act.3

China is desperately in need of every kind of rehabilitation and reconstruction equipment. The transportation situation is tragic. It is seriously impeding, almost completely preventing, her post war recovery and has constituted a major contributing factor to the current difficulties and confusion preventing progress in securing a political settlement in China.

Various moves taken by our government have been steps in the complete implementation of a long agreed program for helping the Chinese nation. The proposed surplus property contract is an essential part of this program.

I fully realize that the question of using Chinese labor presents a number of complex angles. The problem from the Chinese point of view is the conservation of their limited foreign exchange assets which they need for purchases of urgently required materiel and for the rehabilitation of their currency. They can pay Chinese laborers in their own currency after they return home and they can also arrange to support them for the duration of their stay in the Philippine Islands. Further I believe they count on using demobilized or demilitarized Army units who would be remaining on the Government payroll in any event until arrangements could be made or the economic life is resuscitated to find them employment.

Should the Chinese not be permitted to use their own laborers, we will certainly be pressed to loan them additional funds to cover the additional US dollar costs of employing non Chinese labor. While such a request would be justified in view of the Chinese foreign exchange position, you can appreciate it would be difficult for us to justify it to Congress.

I would appreciate your good offices in this matter.4

Faithfully yours,

Document Copy Text Source: Records of the Department of State (RG 59), Lot Files, Marshall Mission, Military Affairs, GOLD Messages, National Archives and Records Administration, College Park, Maryland.

Document Format: Typed radio message.

1. Formerly U.S. high commissioner for the Commonwealth of the Philippines (1937-39, 1945-46), McNutt had become the first U.S. ambassador to the newly independent Republic of the Philippines on July 4.

2. On the Foreign Liquidation Commission’s agreements for the sale of U.S. surplus in the Pacific region to China, see Foreign Relations, 1946, 10: 1041-42.

3. On November 19, 1945, Senator Millard E. Tydings had introduced the Philippine rehabilitation act into Congress (S. 1610). It passed and was signed by the president on April 30, 1946.

4. By the end of August, the United States had decided that the Philippines should negotiate the purchase of the surplus there and none was to go to China. However, the U.S. began negotiations with China that would allow that government to purchase some $500,000,000 (original cost) in U.S. property located at other Pacific sites at 22 percent of cost. (Ibid., pp. 1055-56.)

Recommended Citation: ThePapers of George Catlett Marshall, ed.Larry I. Bland and Sharon Ritenour Stevens(Lexington, Va.: The George C. Marshall Foundation, 1981- ). Electronic version based on The Papers of George Catlett Marshall, vol. 5, “The Finest Soldier,” January 1, 1945-January 7, 1947 (Baltimore and London: The Johns Hopkins University Press, 2003), pp. 619-620.

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