Memorandum by the Chief of the Division of Far Eastern Affairs (Hamilton)

Subject: Question of Loan to China: Political Reasons Therefor

On December 30, 1941 General Chiang Kai-shek expressly asked that the Government of the United States extend to China promptly a large loan (principally for political purposes and principally as a mark of confidence in China). A few days ago General Chiang Kai-shek renewed this express request.

For four and one-half years Chiang Kai-shek has been the backbone and fountainhead of Chinese resistance in much the same way as George Washington was the backbone and fountainhead of this country’s fight for independence. It would be a very serious matter to do anything which would shake Chiang Kai-shek’s confidence in the United States or make his position in China more difficult than it is.

Following the entry of the United States into the war, the United States in the Declaration of United Nations70 for the first time gave concrete manifestation of acceptance of China as a full-fledged partner. Such acceptance on the part of the United States is a matter which is very close to Chiang Kai-shek’s heart. In the military situation in the western Pacific China and Chiang Kai-shek have been given certain recognition. It is doubtful, however, whether in Chinese eyes current military arrangements give China as important a place as many Chinese feel is her due.

China has, of course, been greatly disappointed at the severe reverses suffered by the Allied Forces in the western Pacific. Whether during the next few months further reverses will be suffered or whether the Japanese will be checked, only the future can tell. In either contingency the best assurance of continued unity in our relations with China is to regard China politically and psychologically as a full and equal partner in the war against our common enemies. Should further severe defeats to Allied Forces ensue and should China temporarily be virtually cut off through closure of the Burma Road from access to her friends, the likelihood of China’s perseverance in her war effort would be substantially enhanced by the granting now of the loan requested by Chiang Kai-shek. Should the Japanese onrush be checked, the giving now to China of a “vote of confidence” would substantially contribute to causing China to push her war preparations against Japan with renewed energy.

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We know that China’s economic and financial condition is urgently in need of being strengthened. Chiang Kai-shek, however, seems, in asking for a large loan at this time, to have in mind primarily political aspects, including the question of China’s morale.

What we can do for China at the present time is limited. We cannot get to China the military supplies and possibly the armed forces which we would like to send. In the field of financial aid, the Government of the United States has the ability to act promptly. Whether China could immediately use the proceeds of a large loan is not, it is believed, of outstanding importance. Any loan granted would, it is assumed, be regarded as a war loan and any portion of the loan not used in and directly connected with the war effort would presumably revert to the United States.

M[axwell] M. H[amilton]
  1. Dated January 1, 1942, Department of State Bulletin, January 3, 1942, p. 3.