Reproduced with permission of the Rockefeller Foundation.
Medical Subject Headings (MeSH):
Postwar Work and Retirement, 1945-1956
Box Number: 10
Folder Number: 2
From: Raymond B. Fosdick
To: Dr. Gregg
Date: October 21, 1946
I am writing this memorandum more to clarify my own thoughts than to initiate an argument. As I told Dr. Gregg and Dr. Loucks
the other day, and as I think I told Dr. Burwell in a brief moment at Sanders Theatre last week, I read your tentative report
with admiration for its vividness and clarity and for the white light which it throws on the confused picture of China. I
had not before seen so illuminating a record of the Chinese situation, and I am sure that just the picture itself will be
worth to the Trustees of the Foundation all that your report cost in terms of hard travel and infinite patience.
But I am troubled - deeply troubled - by what seems to me to be the gap between your description of conditions in China and
your conclusions; and the more I study the report - and I have spent this week end on it - the more convinced I am that the
gap is too wide to be bridged by a page or two of comment that would describe the process by which you arrived at your figures.
Frankly, if your description of the economic and exchange situation in China is correct - and I think it is true beyond the
shadow of a doubt - I do not believe that the Trustees of the Foundation would be at all willing at this time to make a definite
commitment for the future. The report states, for example, that "rapid, profound and continuing change marks the present
situation in China" and that "the present situation is dark." You say: "The present unpredictability of the
extent and rapidity of inflation paralyzes planning."
This same comment is made by such business concerns as I was able to get in touch with - concerns that have extensive operations
in China, i.e., the Standard Oil Company, the Chase Bank, the National City Bank and the International General Electric Company.
They underscore everything you say in your report about the chaotic conditions and uncertain future in China. My question
is how in view of this complete "unpredictability" - to use your word - the Trustees of the Foundation can be persuaded
at this juncture to undertake a permanent and final financial plan? What possible assurance is there that the solution you
propose would be a lasting one, guaranteeing the indefinite continuance, with cessation of further Foundation assistance,
of a medical school of high scientific and moral integrity?
When your Commission went to China last May, we all had high hopes that you would find some evidence that the conditions over
there were beginning to straighten out. These hopes have not been fulfilled, as your honest and objective report abundantly
demonstrates. Indeed, there seems to be every indication that since your visit the situation has become worse; and the future
today - from such reports as I can get from the State Department and elsewhere - looks far darker than it did in July when
your report was drafted. As an indication of what is happening, when you wrote your report, exchange was somewhere around
2480 : 1. Today the official rate is 3350 : 1; but nominal quotations range from 4400-6000 : 1. Moreover the war in China
is growing in bitterness and intensity, with solution apparently indefinitely postponed.
My query is this: How can a fixed and final financial plan, made under such circumstances, possibly be anything else than
a blind guess? You say: "The Trustees and Administrators of the PUMC should know well in advance (italics yours) what
minimum sum they can plan upon having as income for a year's operation." You further say: "Such a procedure would
give the PUMC trustees an immediate and clear view of what annual support from the CMB they may count on during a five year
period . . . The valuable purpose served by this plan is the foreknowledge it gives the administration of the school of what
it must plan for well in advance."
All this would be true if conditions in China had some degree of stabilization. With conditions as they are now, however,
your recommendations frankly seem to me to have no immediate significance. With present and prospective exchange fluctuations,
and the "permanently increased cost of living in China" (p. 29), where does one find assurance that the yield in Chinese
currency will provide a "finiteness of income" and "the cessation of indefinite dependence on The Rockefeller
Foundation"? In other words, might not the exchange-inflation situation present the PUMC with a problem in which US$ stipends
would be completely inadequate in terms of Chinese currency needs?
You suggest a possible hedge against this contingency by having the CMB transfer to the PUWC half its annual pledge, this
half to be invested by the PUMC in China. But this strikes me as a dubious protection.
In what enterprises or currency would the PUMC invest? If it turned American dollars into local dollars in an exchange market
where the local currency was rapidly depreciating, sizeable losses would be incurred. In any event, under present conditions
in China, the hedge would be little more than a gamble - a gamble that might well turn out to be wrong.
This opinion was confirmed by two or three financial people with whom I discussed this particular recommendation; none of
them believed that at this juncture it was practicable.
Looked at from the standpoint of the Trustees of the Foundation, if they made the grants you recommend, what would they be
buying? You speak of "a minimum below which money invested in medical education in China would progressively lose its
effectiveness." What guarantee would the Trustees have today that the $9,000,000 you recommend would buy results above
that minimum either now or in the foreseeable future? In other words, for what kind of medical school would the Trustees be
providing - "a school of high quality" (your words) as in the past, or an impoverished school where adequate standards
could not be maintained?
It seems to me that nobody can with any degree of assurance answer these questions today. The representatives of the four
business concerns which I consulted were unanimous in believing that it was impossible to forecast the shape of things to
come in China. Let me put down the impressions and opinions upon which these four representatives were substantially agreed:
1. All four share a feeling of personal disillusionment and heartache that the fourteen months since V-J Day have brought
a sharp deterioration in personal, political and economic standards and relationships, both internal and external.
2. Deep-seated personal enmities and the vital Chinese consideration of face underlie and progressively undermine the political,
economic and fiscal pictures - and they all add up to a struggle for power.
3. Even if the Central Government could suppress the Communists ("It is hard to contain an idea"), it is unlikely
that the forces presently controlling the Kuomintang would then make significant concessions or reforms in the political,
economic or social field.
4. The situation is almost bound to grow worse before it can be better, and an "explosion" within 2-3 years seems
inevitable. The extent of further inflation and the timing and rate of revaluation are beyond guess, but factors like labor
attitudes will probably not allow the "new levels" to bear any resemblance to the "old levels."
5. The internal Chinese Communist issue could conceivably become a USSR-US, and thus a world, problem.
6. Considerable evidence suggests a concerted Government-inspired drive to eliminate all foreign enterprise from China (banking,
7. While it is generally hoped and believed that a workable situation will again return in the long run (10-25 years) through
exhaustion and regeneration with new leadership, all four representatives look for very difficult if not chaotic conditions
for at least the next 2-3, or even the next 5-10 years.
8. All therefore are presently operating on a "day-to-day" basis, keeping commitments and risks at an absolute minimum,
ad maintaining the closest possible intelligence.
Under these circumstances I am strongly of the opinion that the Trustees of the Foundation would not be willing at this time
to appropriate $9,000,000 as a final settlement of our relations with the PUMC. Nor could I myself with any degree of enthusiasm
support such a proposal before the Trustees. It seems to me that what is called for are tentative measures, adapted to the
conditions of the hour. I earnestly hope that the college can open in September 1947, assuming political conditions make it
possible. How far will the present funds of the CMB go toward such a limited objective? Would it be necessary to start with
more than the first year students? Would such a start require the reopening of the hospital? I am now on technical ground
where I am not competent to go. But I would strongly urge your Commission to explore the possibilities of a "day-to-day"
operation, which would be effective until the future of China is clearer and more predictable than it is at the moment.
I cannot close this memorandum, which I have written with deep reluctance, without again expressing my own grateful appreciation
- which I know is shared by all the Trustees - for the manner in which the Commission approached its task, and for the illumination
and integrity which characterize its report. I am completely confident that the work of the Commission will prove to be of
invaluable assistance as we all of us try to feel our way forward through the fog of uncertainty which conceals the future