893.51/6–447
Memorandum by the Director of the Office of Financial and
Development Policy (Ness) to the Under Secretary of
State for Economic Affairs (Clayton)
[Washington,] June 4, 1947.
On May 26 Secretary Marshall indicated to Mr. Vincent that (1) he wished to
secure the extension of the present $500 million earmarked for China, and
(2) he wished to have prepared a list of projects aggregating $100 million
upon which the Eximbank might act shortly.
Mr. Thorp has acquainted you with the results of our conversation yesterday
with Mr. Martin concerning, primarily, the extension of the earmark. Mr.
Thorp has informed me that you wish to speak to the Secretary about his
proposals and that for this purpose you will wish to have available the list
of projects to which I have referred.
I attach hereto a proposed memorandum from Mr. Vincent and myself to the
Secretary. It covers a list of projects aggregating in all about $135
million. I have asked that the list reach this larger figure in the thoughts
(a) that individual amounts will be pared down in
further negotiations with the Bank, and (b) some
projects may be unacceptable either to the Secretary or the Bank. I wish
particularly to emphasize that the preparation of this list does not of
itself indicate that we are urging a credit of $100 million to China at this
time. It is drawn in response to the Secretary’s directive. It is, however,
a good list, although I have some reservation concerning the Yellow River
bridge project.
There is one matter to which I wish to draw your particular attention. I
understand that at about the same time the Secretary made his request for
this list he indicated also that the existing restrictions upon the purchase
in this country of arms and armaments should be relaxed. I do not know
whether it was the Secretary’s intention that the proposed financing should
permit the Chinese, by the release of resources presently committed or
necessary for the purchase of imports, to finance in effect a rearmament
program. If so, the attached list will not completely serve his purposes.
Except for the cotton-purchase program, the individual projects can be
construed as additional, in the sense that they would not be undertaken in
the absence of such financing. I think it might be well to keep this aspect
of any contemplated financing of the Chinese firmly in mind as you discuss
this matter with the Secretary.
The attached memorandum has been submitted to Mr. Vincent for his concurrence
before presentation to the Secretary, but I have not yet heard from him.
[Page 1131]
[Annex]
Proposed Memorandum by the Director of the Office of
Financial and Development Policy (Ness) and the
Director of the Office of Far Eastern Affairs (Vincent) to the
Secretary of State
[Washington,] June 4, 1947.
Discussion:
Attached is a list of selected projects68 upon the basis of which the Export-Import
Bank might extend loans to China aggregating $100 million. The projects
listed have been selected from those which have been officially
submitted by representatives of the Chinese Government to the
Export-Import Bank since April 1946, or which have been discussed by
them with officials of the Export-Import Bank and/or of the Embassy and
the Department of State.
In the aggregate, the projects enumerated herewith amount approximately
to $135,000,000. However, decisions as to the particular projects to be
selected and the amounts finally to be approved can only be reached in
subsequent negotiations between the Chinese Government and the
Export-Import Bank, on the basis of the Bank’s technical and engineering
appraisals of the projects submitted. The amounts of the loans involved
in the individual projects are as requested in the Chinese letters of
application in each instance in which a formal request has been
made.
The projects are all of an economically-productive character, and relate
to such basic needs as railroad transportation, harbor development,
airport facilities, coal mining, electric power, artificial fertilizer,
and the cotton textile industry. They would help improve China’s foreign
exchange position and would contribute to general economic development
and recovery. Furthermore, they would facilitate exports and imports and
the exchange of commodities between the United States and China as
required by the policies of the Export-Import Bank. Two of the projects
listed contemplate participation by American companies, either in
capital investment or through the provisions of technical and managerial
services. It is assumed that in all cases suitable provision will be
made for sound management and competent technical services, and wherever
feasible for participation by private capital, Chinese or American, in
the projects supported.
It is expected that the Chinese will shortly present this Government with
a list of projects for which credits are desired. Included therein may
be some, in addition to those selected in the attached list, which can
merit early consideration by the Export-Import Bank.
[Page 1132]
Recommendation:
The attached list is recommended as a list of possible projects which the
Department would wish the Export-Import Bank to consider with a view to
arrangement of credits for China in the near future, aggregating at
least $100 million.
