893.51/1–2646: Telegram

The Secretary of State to the Embassy in China

236. For General Marshall from Colonel Davis. Delay has been occasioned in signing of contract for extension of Eximbank credit for cotton. Negotiations now being held by Chinese and Eximbank representatives on following points:

Desire of Eximbank to secure assurances from Chinese that cotton purchased with credit will be equitably distributed between Government controlled and private textile mills;
Desire of Eximbank to secure assurances that private mill owners, if resources are available to them, will be permitted to make their own private imports of cotton;
Request of Chinese to use Eximbank credit for purchase of private imports already shipped to China on consignment by US cotton merchants.

Eximbank is concerned over apparent setting up of Chinese Government monopoly in cotton and are anxious to secure representations on the part of the Chinese for protection of private mill owners (re Deptel 135 of 22 January and Urtel 166 of 26 January).

Both UNRRA Washington and Eximbank consider it necessary to coordinate the China loan and UNRRA cotton imports. UNRRA Washington is developing plans toward this end, and efforts are also to be made to coordinate private commercial imports. Present indications of UNRRA representatives are that UNRRA program of 125,000 tons will not be reduced as result of credit, unless requested by Chinese. However, need is clearly recognized for coordination in phasing of procurement and shipment of separate import programs as result of which UNRRA program may very likely extend beyond the originally planned period of first 6 months of 1946.

UNRRA has sent cable to its China office, presenting facts from this end and asking for report and recommendation. Suggest that Dawson maintain contact with UNRRA China office so that estimate of situation with respect China’s needs and ability to absorb can be agreed at that end. [Davis.]