845C.7793/8
The Department of State to the British Embassy
Aide-Mémoire
Reference is made to the aide-mémoire left by Mr. Butler of the British Embassy with Mr. Hornbeck on February 177 and to Mr. Butler’s conversation with Mr. Hornbeck on February 24,7a in regard to the proposed construction of a railway between Lashio, Burma, and Kunming, China.
This Government has noted with interest that the British Government is prepared, provided it obtains satisfactory assurances from the Chinese Government in regard to certain matters, to provide the finance required to enable the Government of Burma to construct the sections of the proposed railway from Lashio to the Chinese frontier and to ask the Government of Burma as a matter of urgency to complete the necessary surveys in Burma and start the construction of the sections already surveyed.
It is noted that the British Government has stipulated that, if at any stage rails, bridging material and other steel needed for the Burma section cannot be provided from sterling sources as required, the Chinese Government shall finance the purchase from dollar sources with their dollars. This presumably would involve dollars made available by this Government under credits to the Chinese Government. The question whether credits made available to the Chinese Government by this Government may appropriately and advisedly be used for this purpose (or for the purchase of materials for construction of the Chinese section) is being taken up with other interested agencies of the Government, and the Department of State will expect to communicate further with the British Embassy following the receipt by it of the views of those agencies.
With regard to that stipulation in the British proposal which makes the British Government’s consent to and approval of the project under consideration contingent upon acceptance by the Chinese Government [Page 604] of the settlement of a boundary dispute between the British and the Chinese Governments “on the lines of the offer already made by the Government of Burma”, this Government desires that any attitude which it may take with regard to the Burma–Yunnan railway project be not construed as expressing approval of or as assenting to such a stipulation.