Is that Mr. Grew's letter?

Mr. Service. Yes, sir.

Mr. Chairman, may I point out that I have just handed over the
original of Mr. Grew's letter.

Senator Tttdings. When the reporter has made a copy of it, I will
ask him to return it personally to Mr. Service and ask Mr. Service to
keep the original intact in case the committee desires to see it again.

Air. Service. Thank you very much.

Do you want to read it or do you want it to go into the record with-
out 7'eading it ?

Mr. Reiixy. I til ink it is worth reading.

Senator Tydixos. Go ahead and read it.

Mr. Service. This is a letter from Mr. Joseph C. Grew, dated April
17,1950:

Dear Mr. Service : Your letter of April 13 has this moment reached me and
I hasten to reply without delay.

My letter to you in August 1945, and that of the then Secretary of State, Mr.
Byrnes, after the grand jury had cleared you in the Anierasia case, should be
sufficient to clarify your position at that time and to substantiate the fact that
you had been completely cleared by due process of law of the charges against
you.

My recollection is that I further stated that you would be reinstated in the
Foreign Service without any implication of an adverse nature against your
fine record.

Vlthougli I have not now the text of that letter before me other than a part
you have quoted. 'That is the way democracy works," there are inaccuracies
in the public statements quoted in your letter. I did not insist on your prosecu-
ti(m, apart from that of the other five persons involved.

Having been informed as Acting Secretary of State by supposedly reliable
authority that an agency of our Government had what it considered complete evi-
<JeiH'e of guilt. I quite properly ordered "the arrests, which, of course, presume
prosecution. I did not at that time know the names of the persons involved,
including yours, and I did not wish to know them until the order had been carried
out, for justice nmst not discriminate. When I learned that you, who stood so
well in the Foreign Service, were one of those charged with the theft of official
documents, I was, as I later wrote yon, inexpressibly shocked. It was a great
relief to me that .vou were cleared by the grand jury and a great satisfaction
to see you reinstated in the Foreign Service, with no stigma whatever on your
record.

I was not forced to resign as Under Secretary of State. Myths about this have
arisen. For some time I had wished to retire. The war was then over. I had
completed 41 years of service. I had passed the usual age limit, and I was at
that time in ill health and was facing a possible major operation. It was, there-
fore, entirely on my own initiative that I Insisted on retiring, even though Secre-
tary r.yrnes strongly urged me to continue in service. Those are thfc iacts, and
yon may use this letter in any way you wi.sh.

With the best of wishes to you,
Very sincerely,

Joseph - . Grew

Senator Tydings. Is that the letter you referred to, thtj original
letter. Avhich you Avould like to keep?

Mr. Service. Yes, sir.

Senator Tydings. Now that you have read it, unless the ". mmittee
desires to have some other use for it, you may keep it, as it ^^ already
in the record, but we may want it again, so have it available Proceed
with Your statement.



1278 STATE DEPARTMENT EJMPLOYEE LOYALTY LS^ESTIGATION

Mr. Service, Senator McCarthy has charged that I am one of a
dozen top policy makers in the entire Department of State on Far
Eastern policy. Actnally, I have never occnpied a policy-making posi-
tion in the Department of State.

Senator McCarthy has charged that when Chiang Kai-shek was
fighting our war, I sent hack official reports to the State Department
nrging that we torpedo onr ally, Chiang Kai-shek, and stating in
effect that communism was the Jbest hope of China. Actually, as a
reading of my reports will disclose, such recommendations as I have
made were designated to prevent the collapse of Chiang Kai-shek's
government and to resist the domination of China by communism.

Senator McCarthy has charged that I have been in the Far East
trying to turn the whole business over to Russia. Actually, as my re-
ports written from China clearly indicate, I had a full appreciation
of the dangers of Russian domination and sought means of preventing
such domination.

Senator McCarthy has charged that subsequent to my clearance in
the Amerasia case, I was reinstated and placed in the position of
controlling ])lacements and promotions of personnel in the Far East.
Actually, I have never been in charge of, or in a position to control,
either placements or promotions of jiersonnel in the Far East or in
any other area. On one occasion I did serve as a member of a 5-man
board which recommended promotions of certain junior foreign service
officers. My vote was but one of five and the recommendations of our
board were passed upon by the Board of the Foreign Service, the
Secretary of State, the President of the Ignited States, and confirmed
by the United States Senate.

Senator TydinCxS. Have you finished your statement, Mr. Service?

Mr. Service. I have finished it, thank you. Senator.

Senator Tydings. Mr. Morgan, have you any questions?

Mr. Morgan. Mr. Service, at the outset, I believe some reference
was made as to the possibility .of this subcommittee obtaining the
transcript of the proceedings incident to your loyalty hearing. I would
like to ask if we have any assurance, either from you or from your
attorney, as to whether or not that will or will not be made available
tons?

Mr. Service. May I let my attorney answer that question, sir?

Mr. Rhetts. In the first place, I should say that we do not yet have
the full transcript of the Loyalty Board hearings. It is our desire that
as soon as that transcript is completely available, that it be made
available to this committee and its staff for its use. It will be necessary,
however, for us to make it available to the subcommittee on this con-
dition. Many of the witnesses who testified in this proceeding did so
under the impression and under the assurance that they were testify-
ing in a secret proceeding. Before the committee could make public use
of any particular witness' statement, I think it would be necessary for
us to be notified so that we might, in turn, obtain the consent of the
witness who had testified. Nevertheless, so far as the content of the
material is concerned, we wish to make it available to the committee.

Senator Tydings. I will ask you now that whatever material you get
touching on Mr. Morgan's question, you work out the details with him
and then he can report to us, for our approval, just what the under-
standing is, and we can act on it.



STATE DEPARTMENT EMPLOYEE LOYALTY INVESTIGATION 1279

Mr. M()i;(;ax. A further preliniiiiaiv question, Mr. Service. Refer-
ence has been made in your statement to the various reports which
you submitted to the State Department. Just for our information
have you prepared a compilation at all of these reports that we might
consider here?

Mr. Service. May I allow my counsel to answer that, sir?

Mr. RiiETTS. If, Mr. Mor^jan, you mean a list of the documents that
have been located, that is, the reports that have been located, we do
have such a list. If you mean do we have a complete set of copies
of them, we do not. There have been used in the Loyalty Board pro-
ceeding]; these documents which are a part of the files of the State
Department. We do not have a complete set of those documents our-
selves. We have a list of them and identification of them which we
can make available to the committee. In that connection, I might say,
as Mr. Service indicated in his statement, I would suppose that those
documents would be available to this committee upon its request by
the State Department.

Mr. MoRGAx. ISIy question is merely directed to expediting the mat-
ter, as to whether or not you have it, and I understand you do not
have the actual reports.

Mr. Rhetts. No, we do not.

Mr. MoRGAx. If you will turn, please, Mr. Service, to page 6 of your
statement, I am calling attention now to a statement therein, the
second full paragraph, to this effect :

It is a matter of pride rather tlian apology that I was al)le through these con-
tacts with all of the important Communist leaders from Mao Tse-tung down, to
ol)tain valuable first-hand information for which I have been commended by
both the Department of State and the United States Army.

Incidentally, at this point, what has been the nature of those com-
mendations?

]Mr. Service. Commendations have been in the form of letters, in
the form of official instructions of commendation and ultimatelv in the
form of promotions.

Mr. JSIoRGAX. Thank you.

Were your reports in any way censored by the Communists or Mao
or anyone under his direction and guidance ?

Mr. Service. Certainly not, sir. They never saw them.

INIr. MoRGAX^. A^liat I am trying to find out, Mr. Service, is whether
you had free rein in submitting these reports without clearing them
in any way through Communist channels.

Mr. Service. I had complete free rein in submitting them without
getting approval from any Chinese source.

Mr. MoRGAX'^. In obtaining the information to which you refer here,
was it necessary for you to undergo any commitments or restrictions
with respect to what your reports would contain ?

Mr. SKR^^CE. I made no such commitments. Occasionally if a
Chinese Communist official was talking to a newspaperman, he fol-
lowed the same practice that, I believe, is customary in the United
States. He specified certain material which could be directly quoted
and which so could not be atti'ibuted, but none of the Communist
leaders to whom I talked made any specification at all about use of
their statements or re])orting of the statements or material which they
gave to me.



1280 STATE DIE.PARTMENT EOMPLOYEE LOYALTY mVESTIGATION

Mr. Morgan. On page 7 of your statement, there is an observation
I would like to ask you about. Eeference is made there in the first
full paragraph to the elimination of moderate liberal groups, and I
am wondering if you are referring there to what has been character-
ized at least at one point in these proceedings as a third force in China
as distinguished from Chiang, on the one hand, and Mao, on the
other hand.

Mr. Service. Broadly speaking, that would be correct, but what I
and the others who had similar views were thinking of were these
facts, that within the Kuomintang or the government party, there
was a very large group, many of them American trained, American
educated, devoted to American ideals of democracy, who did not
favor and would have, if they would have been in a better political
position, opposed the policies of the more conservative groups of the
Kuomintang. If I may continue, sir, I think that Secretary of State
Marshall referred to such liberal groups.

There was also in China a very large nonparty group, mainly in-
tellectuals, some of them business people, who again, you might say,
belonged to this nebulous third force. There were also within the
Communist Party strong elements whose orientation was more Chinese
than it was Russian and who had supported the party during the war
because of its united front policies, because of its record of resistance
to the Japanese, who might also, if there had not been a civil war,
been a leavening influence in whatever unified government could be
brought about.

INIr. INIoRGAN. Shortly after this observation in your statement, you
interpolated an additional thought, to the effect that subsequent events,
as we now see them, have borne out to a degree the observations con-
tained in your reports ; is that correct ?

j\Ir. Service. That is correct, sir.

Mr. Morgan. Is it fair to assume, Mr. Service, that perhaps what
you reported may have had a conditioning influence on what those
results have been i

Mr. Service. I don't see, sir, what I as a reporting officer said in
China, my analysis of the trends there, could be in any way the mo-
tivating cause of the developments that have happened. China is too
large and the forces there are too deep ; the stream is too wide for me
to have directed it or caused what has happened.

Mr. IMoRGAN. On page 10 of the report, Mr. Service, in referring
to the testimony of Secretary Byrnes, reference was made to a memo-
randum dated October 10, 1944. Is that the Report No. 40?

Mr. Service. That is the Report No. 40, yes.

Mr. Morgan. Do you have a copy of that available for us?

Mr. Service. We have a copy here, sir. It was also printed in full
in the Congressional Record on October 19, 1949.

Mr. Morgan. In view of the discussion that has revolved about
this report, if you have it available, I would like to request at this
point, INIr. Cliairman, to have it inserted in our record. Will it be
nijule available, Mr. Rhetts, for that purpose?

Mr. Rhetts. Yes, sir. Here is a copy of it.



STATE DEP.\RTMEXT EMPLOYEE LOYALTY ENTVESTIGATIOX 1281

(Report No. 40, submitted bj^ Mr. Service, is as follows :)

[Report No. 40]

United States AIjmy Obsekver Section,

APO 879, October 10, 19],.',.

Subject : The need for sroatei' realism in our relations with Chiang Kai-shek.
To- General iStilwell, Coinniandlng General, USAF-CBI.

1. You have allowed me, as a political officer attached to your staff, to express
niy.'jelf freely in the past re.i::arding the situation in China as I have seen it.
Although in Tenan I am only a distant observer of recent developments in
Chungking and Washington, I trust that you will permit the continued frank-
ness which I have assumed in the attached memorandum regarding the stronger
policy which I think it is now time for us to adopt toward Chiang Kai-shek and
the Central Government.

2. It is obvious, of course, that you cannot act independently along the lines
suggested. The .situation in China and the measures necessary to meet it have
both military importance and far-reaching political significance ; the two aspects
cannot be separated. Because of this interrelation, and because of the high level
on which action in China must be taken, there must be agreement and mutual
support between our political and military branches. But this will be ineffective
without clear decision and forceful implementation by the President.

8. It is requested that copies of this report be transmitted as usual, to the
American Ambassador at Chungking and Headquarters, USAF-CBI, for the
♦^formation of Mr. Davies.

John S. Service.

Enclosure : Memorandum, as stated.

MEMORANDUM

Our dealings wuth Chiang Kai-shek apparently continue on the basis of the
unrealistic assumption that he is China and that he is necessary to our cause.
It is time, for the sake of the war and also for our future interests in China,
that we take a more realistic line.

The Kuomintang government is in crisis. Recent defeats have exposed its
military ineffectiveness and will hasten the approaching economic disaster. Pas-
sive inability to meet these crises in a constructive way, stubborn unwillingness
*'^ submerge selfish power-seeking in democratic unity, and the statements of
'^>iiang himself to the Peoples Political Council and on October 10, are sufficient
evidence of the bankruptcy of Kuomintang leadership.

With the glaring exposure of the Kuomintang's failure, dissatisfaction within
China is growing rapidly. The prestige of the party was never lower, and
♦^iiiang is losing the respect he once enjoyed as a leader.

In the present circum-stances, the Kuomintang is dependent on American sup-
T^ort for survival. But we are in no way dependent on the Kuomintang.

We do not iieed it for military reasons. It has lost the southern airbases and
cannot hold any section of the seacoast. Without drastic reforms — which must
have a political base — its armies cannot fight the Japane.se effectively no matter
bow many arms we given them. Bu.t it will not permit those reforms because
its war against Japan is secondary to its desire to maintain its own undemo-
cratic power.

On the other hand, neither the Kuomintang nor any other Chinese regime.

because nf th^ sentiment of the jieople, can refuse American forces the use

of Chine.se territory against the Japanese. And the Kuomintang's attittide

Drevents the utilization of other forces, such as the Communist or provincial

troops, who should be more useful than the Kuomintang's demoralized

nrmies.

We vepfl not fear Kiiominfnvfi Hurretuler or opposition. — The party and Chiang

will stick to us because our victory is certain and is their only hope for continued

power.

But our suuport of the Kuomintang will not stop its normally traitorous
relations with the rnemy and will only encourage it to continue sowing
the .seeds of future civil war by plotting with th" present puppets for eventual
consolidation of the occupied territories against the Communist-led forces
of popular resistance.
We need not fear the eollapse of the Kiioinintnnri Oovernment . — All the other
erouDs in China want to defend themselves and fight Japan. Any new govern-



1282 STATE DEiPARTMENT E3V[PL0YEE LOYALTY INVESTIGATION

ment under any otlier than the present reactionary control will be more coopera-
tive and better able to mobilize the country.

Actually, by continued and exclusive support of the Kuomintang, we tend
to prevent the reforms and democratic reorganization of the government
which are essential for the revitalization of China's war effort. Encour-
aged by our support the Kuomintang will continue in its present course, pro-
gressively losing the confidence of the people and becoming more and
more impotent. Ignored by us, and excluded from the Government and joint
prosecution of the war, the Communists and other groups will be forced
to guard their own interests by more direct opposition.
We need not support the Kiiomintoufi for international political reasons. —
The day when it was expedient to inflate Chiang's status to one of the "Big
Four" is past, because with the obvious certainty of defeat, Japan's Pan-Asia
propaganda loses its effectiveness. We cannot hope that China under the
present Kuomintang can be an effective balance to Soviet Russia, Japan, or the
British Empire in the Far East.

On the contrary, artificial inflation of Chiang's status only adds to his
unreasonableness. The example of a democratic, nonimperialistic China
will be much better counterpropaganda in Asia than the present regime,
which, even in books like "China's Destiny, hypnotizes itself with ideas
of consolidating minority nations (such as the "Southern Peninsula"), and
protecting the "rights" and at the same ti'iie national ties of its numerous
emigrants (to such areas as Tliailand, Malaya, and the Bast Indies). Fi-
nally, the perpetuation in power of the present Kuomintang can only mean a
weak and disunited China — a sure cause of international involvements in
the Far East. The key to stability must be a strong, unified China. This
can be accomplished only in a democratic foundation.
We need not support Chiang in the belief that he represents pro-American
or democratic r/roups. — All the people and all other political groups of importance
in China are friendly to the United States and look to it for the salvation of the
country, now and after the war.

In fact, Chiang has lost the confidence and respect of most of the Ameri-
can-educated, democi'aticnlly minded liberals and intellectuals. The Chen
brothers, military and secret police cliques which control the party and are
Chiang's main supports are the most chauvinist elements in the country.
The present party ideology, as shown in Chiang's own books China's Des-
tiny and Chinese Economic Theory, is fundamentally antiforeign and anti-
democratic, both politically and economically.
FinaUri, ire need feel no ties of gratitude to Chiang. — The men he has kept
around him have proved selfish and corrupt, incapable and obstructive. Chiang's
own dealings with us have been an opportunist combination of extravagant de-
mands and unfilled promises, wheedling and bargaining, bluff and blackmail.
Chiang did not resist Japan until forced by his own people. He has fought only
passively — not daring to mobilize his own people. He has sought to have us save
him — so that he can continue his conqnest of his own country. In the process, he
has "worked" us for all we were worth.

We seem to forget that Chiang is an oriental : that his background and
vision are limited; that his position is built on skill as an extremely adroit
political nianipnlator and a stubborn, shrewd bargainer ; that he mistakes
kindness and flattery for weakness; and that he listens to Ins own instru-
ment of force rather than reason.
Our policy toward China should be guided by two facts. First, we cannot hope
to deal successfully with Chiang without being hardboiled. Second, we cannot
hope to solve China's problems (which are now our problems) without considera-
tion of the opposition forces — Communist, Provincial and liberal.

The parallel with Yugoslavia has been drawn before but is becoming more
and more apt. It is as impractical to seek Chinese unity, the use of the
Communist forces, and the mobilization of the population in the rapidly
growing oceuiiied areas by discussion in Chunking with the Kuomintang
alone as it was to seek the solution of these problems through Mikhailovitch
and King Peter's government in London, ignoring Tito.
We shonld not be swayed by pleas of the danger of China's collapse. This is
an old trick of Chiang's.

There may bs a collapse of the Kuomintang government : but it will not be
tl:e collapse of China's resistance. There may be a period of some confusion,
but the eventual gains of the Kuomintang's collapse will more than make
up for this. The crisis itself makes reform more urgent— and at the same



STATE DEPARTMENT EMPLOYEE LOYALTY INVESTIGATION 1283

time increases the weight of our influence. The crisis is the time to push— not
to relax.
We shouhl not let Chiang divert us from the important questions by wasting
time in futile discussion as to who is to be American commander. This is an
obvious subterfuge.

There i.'; only one man qualified by experience for the job. And the fact is
that no one who knows anything about China and is concerned over American
rather than Chiang's interests will satisfy Chiang.
We should end the hollow pretense that China is unified and that we can talk
only to Chiang. This puts the trump card in Chiang's hands.

rnblic announcement that the President's representative had made a visit

to the Communist capital at Yenan would have a significance that no Chinese

would miss — least of all the Generalissimo. The effect would be great even

if it were only a demonstration with no real consultation. But it should be

more than a mere demonstration : we must, for instance, plan on eventual

use of the Communist armies and this cannot be purely on Kuomintang terms.

Finally, if these steps do not succeed, we should stop veiling our negotiations

with China in complete secrecy. This shields Chiang and is the voluntary

aliandonment of our strongest weapon.

Chinese public opinion would swing violently against Chiang if he were
shown obstructive and noncooperative with the United States. We should
not be misled by the relatively very few Kuomintang, die-hards ; they are
not the people. The Kuomintang government could not withstand public
belief that the United States was considering withdrawal of military support
or recognition of the Kuomintang as the leader of Chinese resistance.
More than ever, we hold all the aces in Chiang's poker game. It is time we
started playing them.

John S. Service.
October 10, 1944.

^Ir. MoiJGAX. For purposes of clarification, referrinof to page 16
of yoitr statement, Mr. Service, you refer to the fact that you re-
turned to Washington on April 12, 1945, and thereby suggest that
inasmuch as the initial entry into the Amerasia quarters was on
March 11, 1945, that manifestly Mr. Jaffe had prior to your return
to this country established channels for obtaining information. Just
for our record at this point, what was your next previous return to
this country, let us say, prior to April 12, 1945 ?

Mr. Skrvice. I arrived in Washington on October 30 or 31, 1944.

]Mr. ISIoRGAN. October 30 or 31, 1944. How long were you here at
that time?

Mr. Service. I felt Washington, I believe, on November 19, 1944,
proceeded t6 California to visit my family, returned to Washington
on or about January 2, 1945, and left Washington about January 7,