Memorandum by the Adviser on Political Relations (Hornbeck) to the Secretary of State

Mr. Secretary: We have enough evidence, I think, regarding the need for us to make a loan to the Chinese, from point of view of political [Page 434] motivation. It is believed that it would be desirable for us to proceed with this matter promptly without waiting to negotiate or confer with the British about it. It is believed that if we act in a given direction and set the pace, the British will follow along. It is believed that, whether that assumption is or is not made, we should act; and that it is desirable that we give the Chinese a promise before it may become necessary to admit defeat in the Philippines (and possibly defeat in Malaya).

It is recommended that arrangements be made and an assurance be given to Chiang Kai-shek within a very few days that a loan will be forthcoming from this country, in the amount of not less than $300 million—and preferably $500 million.42

S[tanley] K. H[ornbeck]
  1. Notation by the Adviser on International Economic Affairs (Feis): “I wholly agree. I strongly recommend that you discuss this with the President at once with a view towards making immediate decision in principle. Thereupon I believe (1) you should inform the Chinese gov’t (2) immediately inform the Brit. gov’t & express the hope they will take immediate similar action. H. F.”