893.51/6–2047: Telegram
The Secretary of State to the Ambassador in China (Stuart)
754. In informal memo dated May 13 Chinese Amb summarized his statements to Secy on May 8 re financial aid to China, and raised question whether Chinese request for loan of US $1 billion would be “acceptable in principle” to U. S. Govt. On May 22 Minister Chinese Emb was informed82 on behalf of Secy that we were not in position make commitment of kind desired, but that were prepared to receive [Page 1143] and give careful study to informal memo from Chinese Govt which would set forth and support in detail purposes for which it desired obtain credit. On May 27 Chinese Emb submitted memo re plan for utilization US $1 bil loan for economic rehabilitation and reconstruction. It requested $500 mil be secured from presently earmarked funds in Eximbank for purchase in U. S. of reconstruction equipment and materials for projects enumerated, and remaining $500 mil be obtained from Congress to be used in U. S. during years 1947–1949 for purchase certain commodities such as cotton, wheat and petroleum which upon sale in China would provide yuan currency necessary meet internal costs of Chinese reconstruction program. Memo suggested that should formal agreement on total sum require Congressional authorization and therefore cause possible delay, formal agreement on Eximbank earmarked sum of $500 mil should be concluded before June 30 with understanding U. S. Govt would immediately submit remaining half proposed loan for consideration and approval of Congress.
On June 17 UnderSecy of Econ. Affaire informed Chinese Amb that Dept will support early favorable consideration by Eximbank of loans for individual reconstruction projects, but that Dept is not prepared press for extension existing Eximbank $500 mil earmark. He stated it is this Gov’s earnest and continuing desire assist China in meeting its reconstruction problems, but in present situation there does not appear realistic prospect that China could receive or effectively utilize $500 mil in actual Eximbank advances during next fiscal year.
With respect request that US Gov endeavor to secure Congressional approval $500 mil loan, UnderSecy indicated further requests for foreign aid to present session Congress are not contemplated. He added in effect American people presently seem inclined support proposals for financial assistance to foreign countries only if they can be assured aid extended can successfully accomplish its intended purposes.
UnderSecy did not indicate to Chinese magnitude of possible credits for which Dept will support favorable Eximbank action. In response to Amb. Koo’s specific inquiry he indicated cotton loan might be among those to which Dept would be inclined to give favorable consideration, provided there were some assurance concerning repayment prospects perhaps by permitting cotton textile exports from China. Amb. inquired whether it would be possible conclude any specific loans prior June 30, in which case unfavorable psychological reaction to expiration of earmark would be largely offset. UnderSecy replied in his opinion such would not be possible in short time before June 30, [Page 1144] but Amb. was assured that in any public announcement we would seek minimize adverse reaction.