77 Embassy in Washington to Department of External Affairs

Cablegram 1490 WASHINGTON, 8 November 1947, 2.51 p.m.

SECRET

U.N.R.R.A. China Programme.

On 5th November, Central Committee [1] considered without reaching decision Administration's proposal to close China office at end of 1947 and to transfer responsibility for completing programme to a Rehabilitation [Com]mission [2], a Chinese Government agency established by the Executive Yuan, and a Board of Trustees composed of five Chinese Government representatives, five independent Chinese and five International members nominated by Director-General of U.N.R.R.A., the latter acting in individual capacity and not as representatives of Governments.

2. Relevant documents, particularly CCFE [3] 47,126,127 and 128 were forwarded under PI 700 on 17th October and presume you have received advice from Nanking that CCFE had recommended acceptance of proposals.

3. Principal consideration is development of large term projects, which are still in commencing stage and which will not be satisfactorily established for several years. See CCFE 47, 126.

Full utilisation of equipment and materials now lying idle for most part necessitates financing by Chinese currency proceeds of sale of U.N.R.R.A. goods and substantial allotment of dollar exchange.

4. Our informal discussions and Central Committee deliberations point to unanimous opposition, with exception of China, to transfer of U.N.R.R.A. responsibilities under arrangements which would result in Chinese control of long-term projects, local currency proceeds of sales of [UNRRA goods] and five million United States dollars which is to be allocated from U.N.R.R.A.

residual funds largely for technical personnel procurement of P.O.L. [4] and replacement parts, all required for development of long-term projects.

5. Alternative proposal worked out in advance by United States of America, United Kingdom and ourselves and put for-ward by United Kingdom at meeting involved retention of China office up to 31st March, 1948, continuation of CCFE beyond that date on reorganised basis which would give powers specified to CCFE instead of Board of Trustees.

6. United Kingdom were vague as to time CCFE would continue but expressed hope it would in short period be able to recommend transfer of powers to Chinese Government. United Kingdom contemplates [5] transfer of responsibilities at that time, the Rehabilitation Commission and any associate body being concern solely of Chinese Government and U.N.R.R.A. having no right to appoint International representatives in any capacity.

7. Whilst generally supporting United Kingdom proposals, Australian member [6] suggested that in light of relatively undeveloped stage of projects, Central Committee's responsibility to U.N.R.R.A. nations and particularly the necessity of encouraging fullest industrial development in China's own interest, effective International participation might have to continue for longer time than United Kingdom envisaged. He suggested that the possibility of transfer of U.N.R.R.A. functions to the U.N. Economic Commission for Asia and Far East should be explored. This course was taken after consultation with Tange who agreed that U.N. Commission's terms of reference were sufficiently broad and undertaking of the work would probably give Commission opportunity to become effective organisation.

8. China's attitude is that original proposals must stand unchanged. If CCFE continues it must be solely in advisory capacity and China reserved position entirely in regard to counter proposals of United Kingdom and Australia.

9. Following the meeting, a compromise has been suggested which would permit China to set up rehabilitation commission and Board of Trustees without nominated international representatives which would be dependent on [7] fund of Chinese and foreign currency on the CCFE. This is likely to be acceptable to a majority of members, but would appreciate instructions as to whether we should [p]ress our suggestion. We could perhaps say that whilst we believe transfer to U.N. Commission would afford the only effective guarantee of satisfactory development of long-term projects etc, we are forced to accept the compromise, but consider the [8] should authorise the administration to test out the position with Secretary General of the U.N. so as to be prepared in the event that the compromise proposal should prove unworkable.

10. Next meeting of central committee scheduled for 13th November will also consider distribution to Communist areas. Negotiations with Chiang Kai-shek have failed completely. Whilst most members appear now to favour re-allocation to Nationalist areas of supplies intended for Communist areas, we feel we should maintain our previous position and insist upon continuance of impounding and storage except in regard to perishable and similar goods which would otherwise be wasted. While International participation in China programme continues, there should be chance of fulfilment of undertaking in regard to Communist areas.

1 Central Committee of Council of UNRRA.

2 Words in square brackets have been corrected from the report of the proposals in Munro's memorandum 959/47 to Burton, dated 1 December (see page 2), on file AA : A1068, R47/3/6, ii.

3 Committee of the Council for the Far East.

4 Petrol, oil and lubricants.

5 A sign after this word indicates that the next word or words are 'mutilated'.

6 Brigden.

7 A handwritten amendment on the file copy replaces 'on' with 'for'.

8 A sign after this word indicates 'mutilated'.

[AA: A1068, R47/3/2]