The Secretary of the Treasury (Morgenthau) to the Secretary of State

Dear Cordell: Yesterday, at five o’clock, Sir Frederick Phillips of the British Treasury, called on me and gave me a memorandum, a copy of which you will find enclosed herewith.

Yours sincerely,

H. Morgenthau, Jr.


In view of further representations from His Majesty’s Ambassador in Chungking, His Majesty’s Government feel that it is essential to send an immediate reply to the Generalissimo. It is understood that the question of assistance to China is under the President’s consideration.

His Majesty’s Government now suggest that in addition to their supplying munitions on a lend-lease basis a joint offer should be made of a combined loan of $400 millions, of which, in view of the disparity of financial resources, the British share would be $120 millions or £30 millions. The latter sum would be made available immediately but there would be an unpublished understanding that it would be drawn upon only as required for expenditure in the sterling area directly required for the war; each item of expenditure being agreed upon between the two governments with the condition that any amount that had not been drawn upon at the conclusion of hostilities would be repaid. The United States part of the credit would no doubt be made subject to similar conditions.

His Majesty’s Government ask whether the President would agree that we should at once inform the Generalissimo that we have made this proposal to the United States Government.75

  1. In a memorandum dated February 4, 1942, the Chief of the Division of Far Eastern Affairs (Hamilton) stated: “I talked with Mr. White of the Treasury Department over the telephone in regard to the enclosure to the attached letter and raised the question whether any action was called for by the last paragraph of the enclosure. After discussion, there was agreement between Mr. White and myself that this matter had been disposed of by the decisions reached by the American and the British Governments, respectively, and by the announcements of decisions made by each Government. Mr. White said that, when a decision had been reached here to seek Congressional authorization, the Treasury had informed the British of that decision.” For British announcement, see infra.