893.51/6–1747: Telegram
The Secretary of State to the Ambassador in China (Stuart)
736. In executive session June 11 Board Directors Eximbank, President Martin raised question of status after June 30, 1947 of earmark of $500 mil. for possible future credits to China. Dept representative Thorp said this was matter he had wished to discuss with Bank’s directors for some time but that in fact the Dept’s decision had only recently been taken. Dept will not, he stated, press for extension $500 mil. earmark beyond June 30. Dept will support, however, early favorable action on Chinese applications for individual projects which can qualify for Eximbank financing.
Reason for Secy’s decision re extension Eximbank earmark is necessity to avoid sterilization $500 mil. of Bank’s funds in view of competing needs, as in Europe, and fact that there appears no realistic prospect of China’s receiving that amount in actual advances during next fiscal year. While NAC might give a majority vote approving re-earmarking for the consideration of Eximbank, Dept is convinced that Bank board would nonetheless take a firm line of opposition. Absence of earmark will not prejudice, and in Dept’s view, may facilitate [Page 1141] favorable action on individual projects after June 30. Dept’s decision will be communicated to Chinese Ambasador in Washington,77 and you will be advised.78
The Sec’y has indicated his growing concern with development of events in China, and has expressed conviction that US must in its own interest do something to arrest the course of developments there. In conference re Eximbank earmark extension it was consensus that Dept should consider approach to Congress for such funds as may prove necessary for general financial assistance of China although, as the Sec’y pointed but, such program could not possibly be brought to Congress at its present session.
Dept has recently prepared list of projects79 aggregating $135 mil. as basis of which in its view Eximbank might extend loans aggregating approx. $100 mil. Sums specified for individual projects are as requested in original Chinese applications, and are subject to revision in subsequent appraisals by Eximbank. Projects listed are as follows:
- 1.
- Railroads: Hankow–Canton–Kowloon Railroad, $42,654,000; Yellow River Bridge, $4,500,000.
- 2.
- Harbor Development: T’ang-Ku Harbor, $16,750,000.
- 3.
- Coal Mining: Fuhsin, $6,385,000; Peipiao, $1,350,000.
- 4.
- Electric Power: United Power Co., $7 mil.
- 5.
- Airport Facilities: China Aeronautical Services, Inc., $5–10 mil.
- 6.
- Cotton: Cotton credit, $40 mil.
Dept’s list also included $8,400,000 for artificial fertilizer plants (reDeptel 73580) but status this project not now promising. Feasibility Yellow River Bridge project necessarily depends on extent Natl Govs control of territory—Hankow to Peiping. Dept regards Canton–Hankow–Kowloon project as perhaps of first priority, but the sum requested is generally viewed as excessive. Formal applications have not been received by Eximbank for two of above projects, i. e. United Power Co and China Aero. Services, Inc., and these are accordingly only tentatively included. Dept regards them as important to China economically, however, and as promising in their provision for participation by American companies. With respect to all above projects Dept assumes that suitable provisions would be made for sound management and competent technical services, and wherever feasible for participation by private capital, Chinese or American.
[Page 1142]Emb’s comments and suggestions concerning above list are urgently desired. Under present circumstances would Emb recommend other coal mines than Fuhsin and Peipiao which are two mines for which Chinese have applied for Eximbank loans.