893.34/12–3046
The Ambassador in China (Stuart) to the Secretary of State
[Received January 29, 1947.]
Sir: With reference to General Marshall’s telegram 1857 of December 8, 1946 to Warcos89 for Carter and Colonel Carter’s reply thereto (War Department telegram 87326 of December 11 [10], 1946), I have the honor to submit the following information and comments regarding the proposed companion agreement covering the transfer of certain property to the United States Government for use by the United States Navy to be reached in connection with the transfer of United States Naval vessels authorized under Public Law 512.
General Marshall has expressed the view that the transfer of Naval vessels should, when consummated, be in the nature of a free gift. [Page 809] However, the Navy Department desires to use the transfer of the vessels as a means to effect a companion agreement which would be separate from but reached concurrently with that covering the transfer of the vessels and under which the Chinese Government would agree to transfer to the United States Government without compensation certain real property which the Navy Department wishes to acquire. Although the property would be for use of the Navy Department, title thereto would be held in the name of the United States Government. The Commander of the Seventh Fleet contemplates that the property would be acquired in part through the transfer of title thereto, in part through leaseholds of varying duration. General Marshall has concurred in this procedure insofar as it applies to property now held by the Alien Property Administration of the Chinese Government or any other agency of the Chinese Government.
In a memorandum from Rear Admiral S. S. Murray dated December 18, 1946, the Embassy was given a tentative list of properties the acquisition of which has been recommended by the Commander of the Seventh Fleet. A copy of this memorandum is attached hereto.90 It will be noted that the list comprehends the acquisition, either by transfer of title or by lease, of private property, title to which does not rest with the Chinese Government. In the Embassy’s opinion, it will be found impractical to request the transfer of property which is not under the benefit of ownership by the Chinese Government. This opinion is based upon the Embassy’s experience in attempting to commit the Chinese Government to acquire such property for subsequent transfer when the Surplus War Property Sales Agreement was under negotiation. Mr. T. V. Soong then took the view that it was virtually impossible for the Chinese Government to expropriate private property for public use with the object of subsequently turning such property over to a foreign power for its use. Furthermore, the expropriation of private property by the Chinese Government for use by the United States Navy might well create a highly vocal group of property owners eager to misinterpret the intentions of the Navy in requesting the property.
The Embassy is of the opinion that careful consideration should be given to the implication which would arise from an extensive acquisition by the United States Navy of property in China on a permanent or semi-permanent basis, and would view with misgiving any presenting of an opportunity to certain elements to seize upon and publicize the agreement as evidence of permanent occupation of Chinese ports by the United States Navy. This danger might be minimized by making the list of properties comprehended by the agreement as short as is consistent with the Navy’s real needs in the performance [Page 810] of its commitments. It is the Embassy’s understanding that the proposal, when presented to General Marshall and approved by him was, in fact, so limited.
Although it is contemplated that the agreement covering the transfer of the vessels will not mention the transfer of properties for the use of the United States Navy, but that the latter will be the subject of a separate concurrent agreement and will thus constitute a counter-gift on the part of the Chinese Government in return for the gift of the vessels, it is apparent that if the counter-gift becomes large, it will acquire the character of compensation. Since in no case will the value of the properties under consideration approach the value of the vessels, it would appear desirable, insofar as may be possible, to maintain the nature of the acquisition as a counter-gift through limiting the scope of the companion agreement to those properties for which an imperative need exists.
Respectfully yours,
Minister-Counselor of Embassy