Foreign Relations of the United States: Diplomatic Papers, 1945, The Far East, China, Volume VII

893.51/12–2945: Telegram

The Chargé in China (Robertson) to the Secretary of State

Chungking, December 29, 1945—10 a.m.
[Received 2:44 p.m.]

2241. From General Marshall. Reur 2057, December 24.

1. It is recommended that:

a. ExImBank renew credits of $12,000,000 to Central Bank and Universal Trading Corporation on request. Embassy has been informed by Yungli Company that Chinese Govt has guaranteed its credit in which case there is also no objection to ExImBank fulfilling its commitment.

b. It is also recommended that action be taken to make credits mentioned in your 4a and b available.

Our general bargaining position is such that the above actions will not significantly prejudice the carrying out of policy.

2. With respect to Chinese request for $560,000,000 ExImBank loan and any other financial assistance through international (Fund and) Bank or direct from the U. S., these must certainly not be offered, negotiated or advanced until such time as I am able to indicate my satisfaction with progress with the political situation in China in consonance with the President’s directive.

The following are comments in the economic and financial consideration you raise:

a. With respect to the draft treaty of friendship and commerce, we have right to expect prompt initiation of negotiations apart from question of financial assistance to China as she is committed to continue [commence?] negotiations 6 months after termination of hostilities. Whether China is stalling or not will be revealed in course of negotiations. It is agreed, however, that granting of ExImBank $560,000,000 loan should also be contingent among other things upon conclusion of commercial treaty which provides satisfactory legal framework for mutually advantageous trade and investment relations.

b. We concur in your 5 a [c?] and d relating to exchange and stabilization fund respectively.

1. Chinese economic recovery as well as U. S. financial and commercial relations with China demands early action by Chinese authorities to obtain end to present absurd situation. Probably wisest course would be for China to announce a reasonable exchange rate subject to periodic revision under a loose exchange control pending ultimate currency stabilization so that foreign trade can get started again and progress can be made in making the transition from war to peace-time conditions. However, it is felt by Embassy—and I understand Treasury concurs—while insisting on a realistic rate it is not advisable for us to suggest any specific rate which China should establish. In any case pending the establishment of reasonable rates China should be requested to give Embassy adequate waiver. Embassy feels that there will be little difficulty in getting China to accede to this request.

2. It is also agreed that China should again be asked to earmark approximately $500,000,000 for currency stabilization and to start working immediately on determination of satisfactory plan for currency stabilization to be effected at earliest practicable date. With respect to former, I understand that Soong has not yet answered proposal made by U. S. in May 1945.⁴ With respect to latter, if sufficient general progress is being made at the time I raise the question with the Chinese, it may be advisable to inform them that the assistance in the form of high level technical advice of the International Fund and/or of the U. S. Govt will be available. Would appreciate your comment on this suggestion and particularly on whether the technical aid of the Fund or the U. S. (or both) would be preferable.

c. With reference to the general principles stated in your 6, the difficulty lies in their concrete implementation and in deciding at what point China has given indication of having gone too far in discriminatory, monopolistic and other practices.

1. Your 6 a, b, c, and d will to a great extent be covered in negotiation on treaty of friendship and commerce and/or in proposed forthcoming international conference on trade and employment.

2. With respect to your 6 e, while U.S. might not approve, it does not seem reasonable that we could object if for instance China carries out a program of nationalization of basic transportation systems. But we should object to continuation beyond emergency post-war period of Govt monopolies in certain economic spheres such as operations carried on by Universal Trading Corporation and the like.

3. With respect to your 6 f, the attainment of U. S. objectives by commercial policy would be facilitated by the following. If and when we decide to make a large ExImBank loan to China, it should take the form not of a credit to be used by Chinese Govt at its discretion but of a bulk of credit, each specific item of which would be approved on its merits. Such procedure would help in the attainment not only of 6f but also of 6 e.

3. To recapitulate:

a. It is recommended that prompt action be taken to grant credits specified in paragraph 1 above.

b. It is felt that it is desirable to press here now for your 5 b, c and did [d?] without offering any specific quid pro quo but that any commitment regarding ExImBank $560,000,000 loan or other additional financial assistance be made contingent among other things on satisfactory action by China on these points. [Marshall.]

Robertson

4. To establish a Currency Stabilization Fund of $500,000,000. This proposal was set forth in a memorandum of May 8 by the Secretary of the Treasury to the Chinese Minister for Foreign Affairs, p. 1081.