893.51/73973/5
Memorandum by the Adviser on Political Relations (Hornbeck)
Proposed Loan to China
In reference to and in supplement to FE’s70a memorandum of January 29,71 hereunder:
The principal considerations in favor of making this loan, in substantial amount, at this time are, it is believed: First, Chiang has in the political setup in China constantly to deal with certain opposition elements, some of which are favorable to Germany and some favorable to Japan or to the idea of making peace with Japan rather than persevering in difficult and expensive resistance (the loan will greatly strengthen Chiang); second, the making of this loan at this time when there is uncertainty regarding the immediate future of our own military situation in the military operations in the western Pacific theater would signify more of confidence on our part both in our own capacity and intention and in China’s capacity and intention to see the fight carried through to victory than would postponement of the making of the loan until a moment when we may be on the eve of or freshly subjected to new and substantial reverses, at which time the making of this loan might be said to have the appearance of addressing an appeal for help to an ally to whom up to the moment when we found ourselves in difficulty we had been none too generous about giving help. The question of “timing” can be argued both ways, but [Page 454] it is believed that the balance of advantage lies in favor of doing the deed while Chiang’s requests are fairly fresh rather than waiting and letting it appear that our decision arises essentially out of our own necessities.