893.51/6716
The Chairman of the Board of the Reconstruction Finance Corporation (Jones) to the Secretary of the Treasury (Morgenthau)41
Dear Mr. Secretary: Reference is made to our conversation regarding a suggested loan of $20,000,000 by the Export-Import Bank to a Chinese owned American trading company, the loan to be guaranteed by the Government of China or the Bank of China and the proceeds used to buy agricultural products and manufactured goods in this country for export to China.
In 1934 we agreed to lend China $50,000,000 to be used in the purchase of cotton and wheat. Only $17,105,385.80 of this credit was used. In 1931 the Grain Stabilization Corporation, a Government agency, sold China 15,000,000 bushels of wheat for a consideration of $9,212,826.56. The unpaid portions of these credits were taken over by the Export-Import Bank in April 1936.
In April 1937, a loan of $1,600,000 was authorized for the purchase of locomotives in this country. Disbursement of $733,200 on this loan was made in April 1938. It matures monthly over a period of five years.
It will be seen that our total Government credits to China since September 1931 aggregate $27,051,412.36. $14,419,892.36 has already been repaid and the balance is being paid as it matures. $3,801,055.62, including interest, has been paid since September 30, 1937, the last payment having been made September 30, 1938.
[Page 567]While it is not possible to foresee the outcome of the present situation in China, it is probably safe to assume that China will pay her debts, and if none of the purchases in this country would be in conflict with the Neutrality Act, I see no reason why the credit should not be made. Particularly since it is contemplated the borrowers will sell to American importers Chinese products necessary for us to import, for delivery within the period of the maturity of the note, approximating the amount of the credit.
The Export-Import Bank would need to be put in funds through the purchase by the RFC of its preferred stock in the amount of the credit. The President approving, the Bank is prepared to make the loan under suitable provisions to assure the disbursement of the funds in this country for the purchase of American products.
Sincerely yours,
- Copy transmitted to the Department by the Chairman of the Board of the Reconstruction Finance Corporation.↩