The Ambassador in France ( Bullitt ) to the Secretary of State
[Received 2:25 p.m.]
1077. I discussed with Bonnet1 last night the action of the French Government in landing troops on the Paracel Islands and the action restricting Japanese exports to France (reported in my 1040, July 1, 3 p.m.2). Bonnet said that these two actions did not indicate any change in French policy vis-à-vis Japan and that they were not in any way related. The action with regard to Japanese exports was due solely to the refusal of the Japanese to permit French exporters to get their money out of Japan.
Bonnet went on to discuss the situation in China and said that he believed that Chinese resistance could and would continue indefinitely [Page 535] provided China could obtain a loan for the purpose of maintaining Chinese currency in foreign exchange markets. Incidentally the same statement has been made to me by a number of competent observers who have recently come to Paris direct from China.
Bonnet added that he was now satisfied the British were doing everything they could to support Chiang Kai Shek. He said that he was certain that both Great Britain and France would be prepared to advance money to the Chinese Government at the present time if the United States should be able to take similar action. I gathered that he did not envisage a joint loan but that he felt both England and France would grant loans to the Chinese Government if it should be possible for our Export Import Bank or some other agency public or private to grant a loan. The action of the three Governments would be separate but simultaneous.
I am not sufficiently in touch with our present policies vis-à-vis the Far East to know whether this idea is in the realm of practical politics. Recently I have been impressed, however, by the statements of men returning from China to the effect that Chinese resistance may collapse because of this monetary difficulty and that a sum of 100 million dollars would be sufficient to enable the Chinese Government to continue resistance.
I should be obliged if you could give me some slight indication of our policy in this regard.