893.24/1–2546: Telegram

The Secretary of State to the Embassy in China

217. For General Marshall:

1. Re your 1 b, Department does not feel that negotiations for disposal of surplus property, Yuan advances and settlement of lend-lease should await initiation of negotiations for further credits. (Urtel 155, Jan. 25.)

In view of this, your comments are requested on the following procedure:

That we initiate negotiations for overall settlement of war accounts in Washington as soon as practicable, say the end of February.

That discussions regarding further credits be postponed until we can see how war settlement negotiations proceed.

In suggesting this procedure, it is believed here that a prolonged delay in the settlement of war accounts will in the end be disadvantageous to this Government, particularly in regard to the disposal of surplus in the Pacific.

2. With respect to the scope and amount of Eximbank credits and United States participation in programs for the reconstruction and development of China and other countries, the National Advisory Council is now considering the following general policy:

The United States is desirous of participating to the greatest extent practicable in sound programs of reconstruction and development.
It is placing primary reliance on the International Bank for Reconstruction and Development for financing such programs. In addition to this Government’s large capital subscription to the Bank, it is anticipated that nearly all of the Bank’s funds will be raised by placing its debentures and guarantees in the United States money market.
The International Bank will probably be in a position to make only small commitments this year, and these in the fall and winter.
However, the Eximbank will be used to meet interim urgent reconstruction needs requiring commitment of funds in 1946, and deliveries until about the middle of 1947.

The necessity of requesting Congress to provide additional funds to the Eximbank to meet the purposes in d above is being studied. In this study we have suggested a top figure for China of $500 million. In the absence of substantial additional funds from Congress for the Eximbank, the rigid application of the above principles might well result in a considerably smaller amount, perhaps $300 million, for China. Your comments are requested as to political effects of a possible scaling-down of the China credits in view of the fact that when you undertook your mission, Chinese anticipated getting $500 million and of the further fact that all discussions have been blacked out except as you advise.

3. Department concurs with remarks in 8a of your telegram.

Treasury Department agrees with this telegram.