845C.7793/8
The Secretary of State to the Secretary of the Treasury ( Morgenthau )
My Dear Mr. Secretary: There are enclosed copies of an aide-mémoire left with the Department of State by a member of the staff of the British Embassy on February 17, of a memorandum of conversation on February 17 between the Chinese Ambassador and an officer of the Department of State, of a paraphrase of a telegram dated February 19, 1941, from the American Consul at Rangoon to the Department of State, and of a memorandum of conversation between Mr. Butler, Minister-Counselor of the British Embassy, and an officer of the Department of State,8 in regard to the proposed construction of a railway between Lashio, Burma, and Kunming in China. There is enclosed also a copy of this Department’s preliminary reply of this date to the British Embassy.8a
The project outlined in the British Embassy’s aide-mémoire raises a number of considerations, among which may be mentioned the following: (1) The statements made in paragraph numbered five of the British Embassy’s aide-mémoire and the information communicated to the Department by the Chinese Ambassador indicate that the cost of the purchase of materials for the construction of the proposed railway would have to be met, at least in considerable part, from funds made available to the Chinese Government by the Government of the United States. The Government of the United States has made available to the Chinese Government various loans and credits for certain purposes. There is raised the question whether these loans and credits could be appropriately utilized to purchase materials for the construction of the China section of the proposed railway, should the Chinese Government so desire. There is raised the further question whether these loans and credits could be appropriately used for supplying steel materials to be used in the construction of the British section of the proposed railway, should the Chinese Government so desire. (2) It would seem important to estimate whether the proposed [Page 605] railway could be completed within a period of time which would make utilization of the railway important to China’s defense effort or whether completion would take so long as to make it likely that the railway would be useful mainly as a peace-time enterprise. It would also seem important to consider, even should completion of the railway require an extended period of time, the favorable psychological effect which the undertaking of the project at this time would have upon Chinese morale. (3) This Government is of course following a policy of rendering to the British Government and to the Chinese Government all appropriate and practicable assistance.
An early expression of your views in regard to point numbered one above, together with such further comment as you may feel in position to offer, would be appreciated.
A similar letter is being sent to the President of the Export-Import Bank.
Sincerely yours,
Under Secretary