Office of the Historian

893.51/6–2147: Telegram

The Ambassador in China (Stuart) to the Secretary of State

Nanking, June 21, 1947—7 p.m.
[Received June 21—8:23 a.m.]

1369. ReDeptel 736, June 17, 9 p.m. General approach and conclusions of Dept fully concurred in by Embassy. Embassy wishes to stress fact that announcement of non-extension of dollars 500 million beyond June 30 would undoubtedly serve to weaken National Govt internally, unless announcement makes mention of certain projects which are to go to Export-Import Bank for approval and also includes statement to effect that absence of earmark will not prejudice but in fact facilitate favorable action on individual projects after June 30 and that such projects will be designed for economic rehabilitation of China. Embassy accordingly recommends that any announcement of non-extension be on above lines.

With respect to specific projects listed in Deptel 736:

1.
Hankow–Canton–Kowloon railroad approved; according to latest information railroad is in bad shape and will need considerable rehabilitation work. In connection with Hankow–Canton–Kowloon railroad it is suggested that Dept and Export-Import Bank strongly recommend to Chinese that port of Hankow be thrown open to foreign shipping. Chinese have confused coastal traffic issue with question of designation of ports open to foreign shipping. Opening of Hankow to foreign shipping is concomitant of and, incidentally, would facilitate improvement of Canton–Hankow railway. Minister-Counselor on recent visit to Hankow was informed by local Chinese commercial circles that they would welcome such a move which will probably only be adopted under friendly and disinterested persuasion. Desirability of Yellow River bridge project appears dubious at this juncture. But see 2.
2.
Announcement of project approved for political reason that it is desirable to include at least one and possibly two projects for North China, or it might otherwise appear that we are already resigned to loss of China north of Yellow River to Communists. Whether or not project should be carried out at this time is another question on which there is no need for immediate formal decision.
3.
Embassy does not approve of Fushin or Peipiao projects. Nationalist hold on Fushin tenuous and Communists reported to have already captured two of Peipiao mines. Embassy informed that [Page 1145] National Economic Council reviewed whole coal situation at meeting yesterday from which conclusions emerged that Manchurian production can no longer be counted on, that Kailan and Mentoukow supplies are safe at present though transportation subject to temporary interruption by Communist raids, and that production in Honan, Anhwei, Hunan, Kiangsi, and Kwangtung must be revived or increased. There seem to be a number of feasible coal projects alternative to Fushin and Peipiao, such as Hsing Tang in Hunan and Ping Hsiang in Kiangsi, both of which according to Chinese have been surveyed by Pierce83 with projects submitted in Washington, and I. Yang in Honan, south of Loyang.

Four, five, and six approved.

Stuart
  1. The Pierce Management Co., an American firm, was retained by China to survey its coal mining facilities and requirements.↩