893.48/1040

Memorandum by the Chief of the Division of Far Eastern Affairs (Hornbeck)

The Chinese Ambassador called and stated that he regretted having to say that the Chinese Minister of Finance, H. H. Kung, after much effort on the Ambassador’s part, had decided that the Chinese Government could not adopt the plan which the Ambassador had been urging for the handling of the payment of the Chicago Bank Loan.

I said that I received this news with great regret.

The Ambassador said that Kung takes the position that he must handle this obligation in the same manner in which he is dealing with [Page 577] “the others”. I made the observation that, with regard to most of “the others”, this meant “doing nothing about them”, whereas, with regard to some of “the others” the Chinese Ministry of Finance has been making special arrangements of particular character. I said that Kung’s reported position amounted to a refusal to be responsive to the request which the Department had communicated in the form of the suggestion which I had made to the Ambassador in conversations held in December, our request having been occasioned by and having been made in response to the Chinese Government’s request made to this Government in relation to the FCA and the EFC obligations of the Chinese Government. I said that it amounted to a “no” by the Chinese Government. The Ambassador said that he felt that I was putting it a little too strongly.

The Ambassador said that he had informed Mr. Abbott, of the Chicago Bank, of Kung’s position and that Mr. Abbott would be passing through Washington tomorrow and would confer with the Ambassador about the situation. It was assumed that Mr. Abbott while here would call on me. I said that if the Ambassador would explain to Mr. Abbott what the method was by which Kung was contemplating dealing with “all” of the obligations in some one manner, Mr. Abbott might be able to explain the matter to me.

I said that, so long as it remained Kung’s position that he would not be responsive to the suggestions which we had made, I hoped “that the Chinese Ambassador would make no further move toward requesting concessions in connection with the FCA and the RFC payments”. The Ambassador said that this would put him in a difficult position. I said that I realized that he himself had been doing everything possible to move his Government in the right direction and that the last thing that I would wish to do would be to put him in an embarrassing position, but that nevertheless the hope which I had expressed was a hope which I entertained.

It was agreed that the Ambassador would try to make clear to Mr. Abbott points which thus far I had been unable to understand.

S[tanley] K. H[ornbeck]