The Chargé in the United Kingdom (Johnson) to the Secretary of State
[Received June 23—2:04 p.m.]
551. Embassy’s 528 of June 17, 6 p.m.98 In the course of a conversation, the British Treasury referred to the desirability of making [Page 534] funds available to China and confidentially described the position here as follows:
The Foreign Office was strongly in favor of a loan but the Cabinet had not been able to make up its collective mind. The Chancellor of the Exchequer99 was not in favor of taking any action which would offend the Japanese and yet would not have important benefits for China. Simon, therefore, recommended the making either of a substantial loan or none at all. But any large sum would have to have a British Government guarantee and there lay the stumbling block.
The British Treasury felt that not less than £10,000,000 and preferably £20,000,000 would constitute a sum sufficient to facilitate food and other purchases and strengthen the Chinese exchange position.
The British Treasury did not conceal its chagrin at the delay in facing up to this situation and took the line that until the British Cabinet made up its mind it could not appropriately approach the United States regarding joint action.
Asked about the reaction in Japan to any such project, the British Treasury stated that it would no doubt be hard to explain but since the Japanese had always maintained that they favored the bringing of stability to China’s exchange, it might be defended on that score though the defence would certainly be weak and transparent.
The British Treasury mentioned that Russia had accorded China some £8,000,000 of barter credits.