811.516 Export-Import Bank/11–1847
The Acting Chairman of the Board of Directors of the Export-Import Bank of Washington (Gaston) to the Chinese Ambassador (Koo)52
My Dear Mr. Ambassador: Earnest consideration has been given to the application made by your letter of July 31, 1947,53 on behalf of the Government of China, for a credit of $200,000,000 for the purchase of approximately 1,080,000 bales of American cotton for use during the balance of 1947 and nine months of 1948.
It has been difficult accurately to determine the China cotton situation and the needs for the future, but after careful study of all available information the Bank is inclined to accept the view that, with the recent third-quarter exchange allocation of $20,000,000 U. S. currency by the Chinese Government for cotton imports, the stocks of imported cotton on hand, en route and on order, together with [Page 1200] the supplies from the domestic crop, may be expected to cover the overall requirements of the China mills until the end of July, 1948.
As to the need after that date, it is accepted that China may require substantial stocks of imported cotton to carry mill operations over the gap until the new domestic crop begins to arrive on the market in volume; but with the constantly fluctuating conditions in China affecting agricultural production, transportation, coal, and power supply, the Bank does not consider it possible at this time to estimate accurately the foreign cotton requirements of China for the 1948 period.
The Bank is unable to grant a further cotton credit to China at the present time, but, without any commitment that the Bank will finance any part of the 1948 requirements, the Board would be disposed to give the matter further consideration if it is presented again later, in the spring of 1948.
In this connection, the Board wishes me to point out that it has been the general practice of the Bank to limit cotton credits to shorter terms than that suggested in your letter of July 31; also, that applications for such cotton credits have generally been supported by undertakings to export such portion of the finished products as may be necessary to earn foreign exchange to carry and repay the loan. Most cotton credits have been granted on 15 month terms; longer terms have been authorized only under special circumstances. The Bank’s 1946 cotton credit of $33,000,000 to China was made on a 24 month term as a special arrangement.54 This credit is largely repayable during 1948.
It would be helpful to the Bank to have information showing the use made of the cotton purchased under the 1946 cotton credit, including information as to the mills to which this cotton was made available and whether they are government-owned or private enterprises; information as to the terms, interest rates, and arrangements by which the mills were financed under this credit; and information whether any of the manufactured products from the cotton so supplied have been exported, and, if so, in what form and to what countries and in what volume. Similar information as to the proposed allocation of cotton sought under any new credit from the Bank, with information as to the proposed terms and conditions of such allocations, would be helpful in the consideration by the Bank of any renewed cotton credit application.
Sincerely yours,
- Copy transmitted by the Chinese Ambassador to the Secretary of State on November 18.↩
- See footnote 23, p. 1177.↩
- See Foreign Relations, 1945, vol. vii, p. 1204.↩