Evening star., 1949-09-09
Senators Near
Showdown on
Arms for China
Republicans Expected
To Reject ConnoIIy's
Compromise PIon
By J. A. O'leory


to include China in the adminis-
tration's foreign arms bill may
come to a head today as a Is
man committee approached final
action on the program.
Senator Connally, Democrat, Of
Texas is offering to earmark not
more than $75,0O0,O00 for use in
Asia at President Truman's dis
cretion, but there was no as
surance this morning this would
satisfy Republicans unless China
is mentioned specifically.
Meanwhile, the Chinese EN-
bassy denied Senator Connally's
charge that Generalissmo Chaing
Kai-shek "absconded" with $780,
100000 of the Nationalist gov
ernment's gold when he went to
Formosa.
Charges Made in Debate.
There was no absconding by
the generalissimo with any public
funds for his own use," the En-
bassy said in a statement. Fur
thermore, it added, "Generalissimo
Chang is not in Formosa but in
Chungking helping to rally the
forces of the National government
to fight the Communist aggressor.
The charge that Chang had
made off with the money was
made by Senator Connally during
debate in the Senate Wednesday
of the administration plan to help
arm friendly nations against Com
munist threats. Senator Connally.
chairman of the Senate Foreign
Relations Committee, asserted that
Chang had deserted his people"
and had fled to the island strong
hold with the gold.
Senator Connally himself told
a press conference yesterday after
noon he has been informed the
Chang government has three
year budget for the use of the
gold and other monetary reserves
in Formosa, and that these re-
serves amount to $500, 900, 900, and
not the s138, 100000 figure he had
mentioned previously in the
Senate.
The Chinese Embassy said these
were the facts:
81. After the fall of Hsuchow
to the Communists, Nanking and
Shanghai were threatened with q
similar fate. For the sake of safe
ty the major portions of the Gen.
trail Banks gold, silver and other
foreign exchange reserve was
transferred by order of the Ma
tional government to its branch
office in Formosa. This money has
remained in the name of the Ma
tional government and was not
taken by the generalissimo for
his own use or credited to his
name. The step was taken as a
precaution in the same way as
the United States gold and silver
stocks are kept in Fort Knox.
Draws on Reserves.
''2. For the past six months the
National government has been
drawing upon these reserves to
make up part of its budgetary
deficit. Not only the troops in
Formosa but those fighting the
Communists on the mainland
have been paid in the last few
months with the help of remit
tances from these reserves. The
current budget of the National
government for the next six
months counts upon further with
drawal to the amount of $78, ,000,-
900 from the reserve fund in For
mosa.
"3. A part of this same fund
has been used as a reserve for
the new currency in Forrnosa.
which has helped to stabilize
prices and practically stop intla-
ton"
The Embassy's statement then
added that the personal honesty
and integrity of character of the
Generalissimo has been attested
more than once by the official
representatives of the United
States, including Gen. Marshall
and Ambassador Stuart"
The first intimation that ad-
ministration forces in the Senate
would be willing to add to the
arms bill a small token fund for
use in Asia came yesterday after
Vice Admiral Oscar C. Badger had
discussed the Asiatic situation
with the Senate Foreign Relations
and Armed Services Committees
in closed session.
Admiral Badger. until recently
fleet commander in Asia, told the
(See ARMS. Page A-6D