The Chief of the Division of Far Eastern Affairs (Hornbeck) to the Under Secretary of State (Phillips)

Mr. Phillips: This case involves a factor which needs to be considered in connection with matters of high policy.

As a matter of general policy, it is the practice of this Government to be “liberal” in our attitude toward China and to attempt to be “helpful”, it being understood that China is going through a period of great political and economic difficulty, and it being one of the major premises of our Far Eastern policy that the emergence in China of a strong government and the survival of China as a political entity are desirable in our interest as well as in the interest of the Chinese people. It happens that the Chinese Government is today confronted with extraordinary military problems both internal and external which add to the chronic severity of its financial perplexities. In connection with the problem presented by the invasion of Chinese territory by Japanese armed forces and the many problems which arise out of that situation and which concern not alone China and Japan but the rest of the world, China has importuned the whole world, but particularly the United States, for “assistance”. There has been very little that we could do over and above pursuing the course which we have followed in relation to the peace movement and in cooperation with the League. For instance, we have not been in position to fight for peace, nor have we been in position to supply arms or money or any other items of material assistance to the Chinese, who are doing the only fighting which is being done in opposition to the activities of the principal present disturber of the world’s “peace” (Japan). The Chinese are at the same time fighting organized communists within their own borders. At this juncture, they ask us and the British and the Italian Governments to come to their assistance by authorizing the use by China, temporarily, of funds allocated to another purpose for purposes which in the opinion of the Chinese Government are at this time more urgent.

The sum involved amounts to approximately $25,000,000 in Chinese currency. That amount unquestionably would appear substantial to the Chinese in connection with their problem of procuring munitions and carrying on their military operations. Assent by us and the other two Governments concerned to the suspension of payments of the Boxer indemnities for another year would undoubtedly be of considerable assistance to the Chinese. Some of the money thus made available to them would probably be used for making purchases in this country.

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We have taken the position that we cannot assent to further suspension. The British and the Italian Governments have taken the same position. Reply has not yet been made to the Chinese Government. They have made a third appeal to us in the premises. Our Minister to China and our Consul General at Nanking are apparently sympathetic toward the Chinese request.

The draft of outgoing telegram hereunder49 maintains the position which the Department has taken consistently ever since this matter was first brought up a few weeks ago. This Division feels that the Department “stretched a point” (at our instance) when it assented a year ago to China’s request for suspension of the payments for a period of one year. We feel that we should not assent to a repetition. Nevertheless, we realize that in refusing assent we will be making more difficult for the Chinese the carrying on of political and military activities toward which we are favorably disposed and which, if successful, would be in line with the attainment of objectives in world politics which are ours.

I have prepared the above statement in order that the issues may be clearly before the signing officer.

S[tanley] K. H[ornbeck]
  1. Infra.