893.51/7518
Memorandum by the Adviser on Political Relations (Hornbeck)
Financial Aid to China
Practically all who have been connected with the matter are agreed that the primary motivation and objective of the appropriation of $500,000,000 for use in giving financial aid to China has been political, that the use of this money is to be for promotion of the Chinese war effort as a part of the United Nations war effort, and that in making this money available to the Chinese Government we should not attempt unduly to put transactions which may be entered into on a banking or orthodox commercial basis.
The legislation involved has specified that transactions shall be handled by the Secretary of the Treasury with the approval of the President. It has been understood, however, throughout, that, because of the political aspects of the matter, this Department has an appropriate and substantial concern with regard to all phases of the matter.
The money is now available.
It is believed that political advantage would be gained were the American Government now to take the initiative in approaching the Chinese with a proposal or proposals looking toward immediately making available to the Chinese Government of some portion of the money.
There is ample warrant for assuming that Chiang Kai-shek could use some of this money to advantage toward immediate remedying of certain weak spots in his political, military and economic fences: that he could to advantage use some of this money for purposes which he would not wish to divulge and which it would be better that he be not asked to explain.
Is there any good reason why this Government should not proceed at once to arrange for a conference which might be participated in by representatives of the Treasury, of this Department and of the Chinese Embassy and/or T. V. Soong’s purchasing agency (Mr. Fox, who has just returned from China, and Mr. Currie might perhaps also be included)—for the purpose of considering an arrangement for an early allotment of a part of the funds?
Is there any good reason why there might not be advanced on the part of this Government a proposal for a straight loan to the Chinese Government of $100,000,000, a loan on the basis of a simple agreement whereby China would undertake to pay interest and pay out the principal on the basis of an amortization schedule?
[Page 460]Is there any good reason why this Department should not forthwith take an initiative in suggesting to the Treasury that a procedure along the lines above indicated be forthwith embarked upon?
Copies of this memorandum are being sent to FE, EA, FD, A–B and U.82
- Division of Far Eastern Affairs, Office of the Adviser on International Economic Affairs (Feis), the Financial Division, the Assistant Secretary of State (Berle), and the Under Secretary of State (Welles), respectively.↩