893.00/3–1447
Memorandum by the Director of the Office of Far Eastern Affairs (Vincent) to the Secretary of State
In accordance with instructions contained in your memorandum of March 49 (copy attached for ready reference), I had lunch with Mr. Martin of the Eximbank and, after informing him of the contents of your memorandum, I went to some length in explaining our thinking at this time with regard to help and credits to China in relation to the developing political situation.
I told him that we were concerned over the situation in China and desirous of being helpful in a practicable way but without impairing our position that substantial or large scale support should not be forthcoming until there was some degree of real improvement in conditions in China. I emphasized specifically, of course, your desire [Page 1089] that the Bank give favorable consideration to credits for the Canton–Hankow Railroad and the Tangku Harbor Works. I suggested that the Bank might meet its problem of obtaining reasonable assurance of repayment by having terms which would provide for service on the credit as a first charge on revenues and by placing Americans in supervisory positions—chief accountants and possibly chief engineers.
Mr. Martin described the position and attitude of the Bank in terms that are already well-known to you. He pointed out that the two specific credits I had mentioned were for reconstruction and that theoretically the money should be obtained from the International Bank. He said that he would soon have to appear before the Congress in regard to legislation for the continuation of the Bank and that the granting of credits to China under present conditions might seriously embarrass him before the Congress.
Mr. Martin clearly indicated that he was sympathetic with what you were trying to achieve with regard to China; but he was not encouraging with regard to the Bank’s being helpful. He went on to say that nevertheless he would take up the matter of the two credits informally with the Directors of the Bank and let me know the outcome. He asked that I tell you this. I believe he would like to grant the credits but is certain the two Republican Directors would oppose and fears the consequence of such a division.
I have also talked with Mr. Gaston and Mr. Gauss, Directors of the Bank, about this matter. I explained your ideas and went on to say that we could not wait in giving help to China until the last shot was fired and Jeffersonian democracy burst forth in full bloom.
With regard to the two specific credits, I made the same suggestions as I made to Mr. Martin. I said that, if within the next few weeks the Chinese took sincere though limited steps to improve the Government, we should be prepared to meet this move with evidence of approval in the form of limited credits.
Both Mr. Gaston and Mr. Gauss expressed approval of what you were trying to achieve in China, but they both stated that credits under present conditions could be classed only as political and that they did not approve making political loans. They suggested that the Department might go directly to Congress to obtain financial assistance for China. However, in conclusion, they said that they would be willing to consider with an open mind any proposals for credits to China brought before the Directors of the Bank by the State Department member. Their attitude was not hostile but it was not, as you can see, encouraging. Mr. Gaston, I was surprised to find, was more unsympathetic than Mr. Gauss.