Foreign Relations of the United States, 1946, The Far East: China, Volume X

893.51/2–2046: Telegram

The Secretary of State to the Embassy in China

Washington, February 20, 1946—8 p.m.

327. For General Marshall.

A. National Advisory Council currently recommending to President that Congress be asked for additional Eximbank appropriation of $1,500 million. Recommendation is that Presidents message should not include statement re tentative allocation of additional credit, although such statement may later be necessary in Congressional hearings. (Reurtel 247, Feb 8.)

B. Chinese representatives Feb 11 gave Assistant Secretary Clayton memorandum⁷⁷ urging prompt action in granting genl overall Eximbank credit. Memorandum will not be replied to by Dept unless you regard reply as advantageous.

Memorandum included following remarks:

1. Crowley informed Soong that credit of $560 million was approved by Eximbank to meet China’s first year needs. China has received no formal notice of such credits.

Comment: As you know, Eximbank approved no such loan and Chinese have been so informed by various responsible officials. Crowley apparently exceeded his authority.

2. Reference is made to recent negotiation of large British credit, and to French credit of $550 million said to have been approved by Eximbank on same day it allegedly approved $560 million for China. It is stated that effort has been made to distinguish French Eximbank credit on ground that it was for goods approved under Lend-Lease Program, but that in fact “China had several hundred millions of such lend-lease goods similarly approved, so that Chinese and French situations are indistinguishable”. Charge made that despite US interest in development China as “Great Power” it has neglected Chinese situation while aiding France and Britain. Contemplated Exim credit $47 million (now $32 million) for emergency expenditures is not substitute for major credit.

Comment: References to France and Britain are misleading. One—British credit recommended to Congress involves special considerations, including British acceptance of comprehensive agreement re commercial and foreign exchange policy. (See my speech re British loan⁷⁸ radio bulletin Feb. 11.) Two—negotiations of French Eximbank credit of $550 million completed Dec 4 while initial request was in Aug. Terms are same as 3c (30 years at 2⅜ percent) and apply to goods requisitioned but not contracted for under lend-lease prior to VJ Day. As to China having “several hundred million such goods approved”, whole non-military Chinese Program 1945 approximated $100 million. Amount requisitioned but not contracted for probably equaled about $50 million. Three—cost of goods requisitioned and contracted for France before VJ Day is approximately $340 million. These have been or will be delivered under lend-lease 3c terms analogous to US commitment to China of $62 million of lend-lease pipeline. As you know, US recognizes latter obligation but prefers to conclude in conjunction with genl settlement negotiation. Four—while additional lend-lease to France and Britain was generally discontinued after VJ Day, such assistance has continued for China. In September and October lend-lease was approximately $440 million, largely for transport services for which payment can scarcely be required. Estimate for Nov and Dec is about $190 million. Five—both Britain and France provided substantial amounts reverse lend-lease which was waived by President in China’s case, except that China gave certain relatively small amounts “reverse lend-lease” including food and lodging US forces. Six—neither France nor Britain nor any ally received substantial credit analogous to $500 million credit to China in Mar 1942.

3. China needs to know initial overall credit figure to enable it to plan, train personnel, etc.

Comment: Covered by President’s public statement of China policy Dec. 16 [15].⁷⁹

4. China not asking blank check, but proposes to work with Eximbank as closely or more so than France or any country and to encourage private enterprise.

5. Reference to view in some US quarters that China should use all present dollar balances before getting overall credit. This differs from US attitude towards Britain and France.

Comment: This is not the stated position of US Govt.

6. China realizes US has given Genl Marshall wide authority and that he has not yet reached any conclusion re overall credit; however, Washington authorities must necessarily make final decision and it is hoped Dept will take lead and after consulting with Genl Marshall advise Chinese representatives of US policy toward immediate overall credit.

Comment: As should be clear to Chinese from President’s statement of policy, this is what Dept proposes to do, but only after your recommendation.

C. On February 19, S. C. Wang, Chairman, Chinese Supply Commission, called on Dept officer and repeated substance memorandum outlined in B above. Was told that President relies fully on Genl Marshall and that discussions here regarding any overall credit will take place only as recommended by him. Wang stated he would advise Soong of desirability giving you copy of statement previously given Eximbank regarding proposed use of $560 million credit. Informed Wang that you would be advised of conversation and his suggestion to Soong.

Byrnes

77. Not printed.
78. Department of State Bulletin, February 24, 1946, p. 267.
79. Department of State, United States Relations With China (Washington, Government Printing Office, 1949), p. 607.