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Published online by Cambridge University Press: 12 February 2009
For over four years from the Marco Polo Bridge incident to Pearl Harbour China fought alone against Japanese military expansionism in the Far East. Both Britain and the United States recognized China's strategic importance but gave relatively little in the way of material help. On the one hand sufficient aid had to be given to ensure that China continued to act as a bulwark against Japanese imperialism and to keep China from gravitating to the Soviet Union (whose aid programme was more immediate, more generous and took the form of military supplies). On the other hand assistance was limited by British resource constraints, by American isolationist public opinion and by the fear, on both sides of the Atlantic, that overt military aid would provoke Japan into widening the conflict into their own respective spheres of interest.
1. Schaller, M., The U.S. Crusade in China, 1938–45 (New York: Columbian University Press, 1979), pp. 17, 22, 30Google Scholar; Thorne, C., Allies of a Kind: The United States, Britain and the War against Japan, 1941–45 (London: Hamish Hamilton, 1978), pp. 65–76, 84, 93–94Google Scholar; Young, A.N., China and the Helping Hand, 1937–1945 (Cambridge, Mass.: Harvard University Press, 1963), p. 206CrossRefGoogle Scholar.
2. Young, , Helping Hand, pp. 440–42Google Scholar. In addition the U.S. supplied $26m of Lend-Lease aid–1.7% of the total advanced in 1941.
3. On Cripps see Gorodetsky, G., Stafford Cripps' Mission to Moscow 1940–2 (Cambridge: Cambridge University Press, 1984Google Scholar). On Niemeyer see Thorne, , Allies of a Kind, pp. 65, 180, 184–85Google Scholar; Shai, A., Britain and China, 1941–7 (London: Macmillan, 1984), pp. 35, 37–38CrossRefGoogle Scholar; Young, , Helping Hand, pp. 229–240Google Scholar. As of March 1988 the Second National Archives at Nanjing had no record of Sir Otto ever having visited China. On Rogers see Young, , Helping Hand, pp. 71–78, 175–76, 182–85Google Scholar.
4. Niemeyer's official letter of introduction to Chiang Kai-shek, 8 August 1941, OV104/85/1 Bank of England Archives (hereafter Bank Archives).
5. Young, , Helping Hand, p. 217Google Scholar; Schaller, , U.S. Crusade, p. 36Google Scholar.
6. The main sources on the inflation are, Young, A.N., China's Wartime Finance and Inflation, 1937–1945 (Cambridge, Mass.: Harvard University Press, 1965CrossRefGoogle Scholar) and Kai-ngau, Chang, The Inflationary Spiral: The Experience in China, 1939–1950 (Cambridge, Mass.: MIT Press, 1958)Google Scholar. For a more succinct account which draws attention to the “real” factors see Chi-ming, Hou “Economic development and public finance in China, 1937–1945” in Sih, P.K.T. (ed.), Nationalist China during the Sino-Japanese War, 1937–1945 (Hicksville, N.Y.: Exposition Press, 1977), pp. 203–241Google Scholar.
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8. Ibid. pp. 95, 99–102, 106–109, 699.
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10. Leith-Ross's role in Far Eastern policy did not, as has been suggested, end with the outbreak of war, Rothwell, V.H., “The Mission of Sir Frederick Leith-Ross, 1935–6,” Historical Journal, XVIII, 1975, p. 169Google Scholar.
11. S. Cripps, Report by Sir Stafford Cripps on the Position of China, April 29 1940, FO371/24701, P.R.O. Foreign Office comments on the margins of the report suggest agreement with much of the analysis and recommendations.
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13. Foreign Office to Leith-Ross, 29 March 1940, T160/F16829/1, P.R.O.
14. Clifford, N., Retreat from China, British Policy in the Far East 1937–41 (London: Longmans, 1967), pp. 149–150Google Scholar.
15. The loan was secured by tungsten exports and guaranteed by the Central Bank in China. Johnson, the U.S. ambassador, felt that the loan simply drained resources which could otherwise have backed the currency and restrained inflation, Young, , Helping Hand, pp. 135–36Google Scholar.
16. Waley to Leith-Ross, 12 October 1940, T160/1033/026/1, P.R.O. He advised that Soong should not come to London because a loan request would be turned down. T160/1033/F15194/026/1, P.R.O.
17. Foreign Office to Chongqing, 3 November 1940, FO371/24691, P.R.O.
18. Memoranda by L. Hebblethwaite and A. Clarke, 20 October 1940 and 22 October 1940, FO 371/24691, P.R.O.
19. A. Clarke Memorandum, ibid.
20. Ibid.
21. Clark-Kerr to Foreign Office, 4 November and 6 November 1940, T160/1033/F15194/026/1, P.R.O.
22. Clark-Kerr to Foreign Office, 13 October 1940, ibid. In October China had suggested that the U.S. should assume responsibility over some areas as economic protectorates and defend them against Japan, Schaller, , U.S. Crusade, p. 35Google Scholar.
23. Welles, to Morgenthau, 30 November 1940, U.S. Senate Committee on the Judiciary, Morgenthau Diary, China (Washington, 1965), Vol. 1, p. 282Google Scholar.
24. Clark-Kerr to Foreign Office, 4 November 1940.
25. Cripps, , Report, p. 13Google Scholar.
26. Clark-Kerr to Foreign Office, 4 November 1940.
27. Snow, Lois, Edgar Snow's China (London: Orbis Publishing, 1981), p. 203Google Scholar. On Clark-Kerr see also Thorne, , Allies of a Kind, pp. 37, 68Google Scholar.
28. Clark-Kerr to Foreign Office, 4 November 1940.
29. Hall-Patch to Waley, 7 December 1940, Gl 301, Bank Archives.
30. Rogers to Treasury, 7 December 1940, FO371/24691, P.R.O.
31. Hall-Patch to Waley, 5 December 1940.
32. Leith-Ross to Foreign Office, 6 November 1940, FO 371/24691, P.R.O. Waley to Leith-Ross, 14 November 1940; Leith-Ross to Waley 12 October 1940 and 12 November 1940, T160/1033/F15194/026/1, P.R.O. Leith-Ross thought an economic mission might provide cover for a military mission which was desirable. He also supported Clark-Kerr's suggestion that Morgenthau be consulted.
33. Waley to Phillips, 8 November 1940, T160/1033/F15194/026/1, P.R.O.
34. Foreign Office to Clark-Kerr, 3 December 1940, T160/1033/F15194/026/2, P.R.O.
35. Ibid.
36. Leith-Ross to Waley, 12 November 1940 and 21 November 1940; Waley to Leith-Ross, 14 November 1940, T160/1033/F15194/026/1, P.R.O.
37. Leith-Ross to Foreign Office 6 November 1940, F0371/24691, P.R.O.
38. Leith-Ross to Waley, 21 November 1940, loc. cit.
39. Assistance to China, Foreign Office memorandum to the War Cabinet, 10 November 1940; Clark-Kerr to Foreign Office, 22 November 1940; Hall-Patch to Leith-Ross, 24 November 1940, T160/1033/F15194/026/1, P.R.O. Hall-Patch referred to King as the “High Priest” and drew attention to the speculative activities of his son (who had been “run out of Hong Kong in disgraceful circumstances”) and daughter. Hall-Patch wanted Leith-Ross to lead the mission.
40. Schaller has suggested that the American loan gave Chiang the confidence to make the decisive break with the communists. The New Fourth Army incident followed almost immediately early in January 1941. Schaller, , U.S. Crusade, p. 43Google Scholar.
41. Hall-Patch to Foreign Office, 14 November, 1940; Rogers to Foreign Office, 29 November 1940 and 2 December 1940, T160/1033/F15194/026/1 and 2, P.R.O.
42. Assistance to China, loc. cit; Clark-Kerr to Foreign Office, 1 December 1940, T160/1033/F15194/026/2, P.R.O. See also Young, , Helping Hand, p. 161Google Scholar.
43. Dobson, A., U.S. Wartime Aid to Britain, 1940–46 (London: Croom Helm, 1986), p. 14Google Scholar.
44. Phillips to Hopkins, 9 November 1940, T160/1033/F15194/026/1, P.R.O.
45. Early in November Clark-Kerr had suggested that Morgenthau should be consulted and Waley and Brenan had concurred. The Treasury instructions were however, toned down and Phillips was either to approach Morgenthau in a hypothetical way or wait for him to raise the issue. Foreign Office to Washington (draft) 21 November 1940, T160/1033/F15194/026/1, P.R.O. It is unlikely that Morgenthau made any approach because the State Department had not passed on any of the relevant China material and he only knew of Chiang's proposals on 30 November when informed by Soong, T.V., Morgenthau Diaries, I, pp. 274–77Google Scholar.
46. , H.L. & Boorman, H.C., (eds.), Biographical Dictionary of Republican China (New York: Columbia University Press, 1967), Vol. II, pp. 264–65Google Scholar.
47. Coble, P., “The Shanghai capitalist class and the nationalist government, 1927–37” (Ph.D. thesis, University of Illinois, Urbana, 1975), pp. 183–85Google Scholar. On Kung's unwillingness to control prices see Hall-Patch, Memorandum of an interview with H.H. Kung, 11 November 1940, T160/1033/F15194/026/1, P.R.O.
48. C. Rogers, “Dispute with Chiang Kai-shek concerning the continued activities of C. Rogers in China,” T188/284, P.R.O.; Hall-Patch to Leith-Ross, 8 March 1941, T160/1033/F15194/026/3, P.R.O.; Seagrave, S., The Soong Dynasty (London: Sidgwick & Jackson, 1985), pp. 8–9, 258, 409Google Scholar. Seagrave thought Ai-ling had the reputation of being the most hated woman in China.
49. Young, , Helping Hand, p. 171Google Scholar.
50. Schaller, , U.S. Crusade, p. 47Google Scholar.
51. Memorandum of Morgenthau-Currie conversation, 16 January 1941 Morgenthau Diaries, I, p. 348.
52. The Chinese were pressing for a further $50m credit and the delivery of a modern airforce. Schaller, , U.S. Crusade p. 48Google Scholar. For Roosevelt's use of private lines of communication see ibid. p. 19.
53. Clark-Kerr to Foreign Office, 3 February 1941, T160/1033/F15194/026/3, P.R.O.
54. Leith-Ross to Rogers, 17 February 1941, ibid.
55. Rogers to Leith-Ross, 17 February 1941, ibid.
56. Waley to Leith-Ross, 18 February 1941, ibid.
57. Leith-Ross to Sterndale-Bennett (Foreign Office), 22 February 1941, ibid.
58. Ibid.
59. Hall-Patch to Leith-Ross, 8 March 1941, ibid.
60. Handwritten comment on Leith-Ross to Sterndale-Bennett, ibid.
61. Clark-Kerr to Foreign Office, 25 February 1941, ibid.
62. Clark-Kerr to Foreign Office, 4 March 1941, ibid.; Hall-Patch to Young (Treasury), 2 February 1941, T160/1033/F15194/026/4, P.R.O.; Morgenthau Diaries, I, p. 523.
63. Clark-Kerr to Foreign Office, 25 February 1941, 4 March 1941, T160/1033/F15194/026/3. Currie had Hansen from Harvard in mind.
64. Thorne, , Allies of a Kind, p. 81Google Scholar ; Morgenthau Diaries, I, p. 441. Young thought his most important recommendation was that America and Britain should freeze Chinese assets abroad, Young, , Helping Hand, p. 187Google Scholar.
65. Foreign Relations of the United States, Diplomatic Papers, 1941, Vol. 4, pp. 88–85Google Scholar.
66. Schaller, , U.S. Crusade, p. 48–49Google Scholar.
67. Clark-Kerr to Foreign Office, 4 March 1941 and Hall-Patch to Young, 2 March 1941, T160/1033/F15194/026/3 and 4, P.R.O.
68. Rogers reported Currie as privately agreeing with him that the Ministry of Finance was “the central problem of China's war effort” and that Kung's removal would be the real purpose of any mission, Rogers to Leith-Ross, 15 April 1941, T160/1098/F16829/1, P.R.O.
69. The following paragraphs are based on Roger's own account of the proceedings, “Dispute with Chiang Kai-shek,” T188/284, P.R.O.
70. Young, , Helping Hand, p. 175Google Scholar.
71. Young makes it clear that the breakdown in co-operation over the stabilization agreements was the fault of the U.S. Treasury. Paradoxically the wording of the British document was more liberal than that of the U.S. which “smacked of a colonial agreement.” He thought the sophisticated political justification for currency support was not understood by some high circles in both China and Washington. Young, , Helping Hand, pp. 175–184Google Scholar.
72. In November 1940 the Treasury and the State Department were agreed that an American should control the stabilization credits. Currie brought back with him a letter from Kung to Morgenthau confirming that Chen would be the chairman. Chen himself oonfirmed the appointment on 8 March. Morgenthau Diaries, I, 30 November 1940, p. 270, Kung to Morgenthau, 26 February 1941, p. 361: Chen to Morgenthau, 8 March 1941, p. 360. Morgenthau clearly trusted Chen and welcomed the move. Young, , Helping Hand, p. 168Google Scholar; Schaller, , U.S. Crusade, p. 37Google Scholar.
73. Chiang told Clark-Kerr that Rogers had “failed to endear himself to the Chinese and with the exception of T.V. Soong, no Chinese banker had any confidence in his judgement.” The ambassador insisted that Rogers was a good friend of China to which the Generalissimo replied “you mean a good friend of Soong.” These were views which Currie had apparently expressed to Chiang in February. Clark-Kerr to Foreign Office, 5 May 1941, 21 May 1941, T160/1098/F16829/1, P.R.O.
74. Clark-Kerr to Foreign Office, 21 May and 22 May 1941. Rogers was backed in London by the Treasury, the Foreign Office and Leith-Ross: Foreign Office to Washington, 5 May 1941 and Leith-Ross to Sterndale-Bennett, 7 May 1941, T160/1098/F16829/1, P.R.O. Later in May Henry Luce told Madame Chiang that the U.S. ambassador had a low opinion of Kung and that a change in the ministry would be in China's interest. Madame passionately defended her brother-in-law and made it clear that there was no question of him being released, Clark-Kerr to Foreign Office, 22 May 1941, T160/1248/17733/1, P.R.O.
75. Young, , Helping Hand, p. 189Google Scholar.
76. Rogers, “Dispute with Chiang Kai-shek,” T188/284, P.R.O.
77. Wilson to Waley, 19 June 1941, T160/1098/F16829/1, P.R.O.
78. Dobson, , U.S. Wartime Aid, pp. 38, 128Google Scholar.
79. Foreign Office to Washington, 5 May 1941, T160/1098/F16829/1, P.R.O. As late as September Hall-Patch was still hoping that the mission would secure Rogers’ permanent appointment on the board. Hall-Patch and Rogers to Treasury, 24 September 1941, T160/1248/17733/2, P.R.O.
80. Phillips to Treasury, 16 May 1941, Gl 301, Bank Archives.
81. Clark-Kerr to Foreign Office, 13 May 1941, Gl 301, Bank Archives, Eden to Wood, 24 May 1941, T160/1098/F16829/1, P.R.O.
82. Waley to Hopkins, 21 May 1941, T160/1098/F16829/1, P.R.O.
83. Waley to Hopkins, 26 March 1941, ibid.
84. Waley to Hopkins, 17 May 1941, ibid.; Hall-Patch to Waley, 19 May 1941, Gl 301, Bank Archives.
85. Phillips to Wilson, 24 May 1941, T160/1098/F16829/1, P.R.O.
86. Wilson to Chancellor, 10 June 1941, ibid.
87. Wilson to Waley 19 June 1941, ibid.
88. Niemeyer to Butler, 17 June 1941, Gl 301, Bank Archives. The letter was not sent but reported verbally to Butler.
89. Niemeyer to Wilson, 18 June 1941, ibid.
90. Niemeyer to Wood, 19 June 1941, ibid.
91. Wilson to Wood, 10 June 1941, T160/1098/F16829/l, P.R.O.; Addis to Norman, 18 June 1941, Gl 301, Bank Archives.
92. Niemeyer found himself “getting more and more sick of this damned place and of this damned job,” Niemeyer to Catterns (Bank), 27 August 1941; and Niemeyer to Norman, 11 September 1941, Gl 301; Bank Archives.
93. One reason for American hesitancy was that ambassador Gauss felt that the mission would prove to be another British attempt to embarrass Kung and that whilst it might have a good psychological effect, it would simply lead to a renewed request for loans with the U.S. expected to furnish the larger part, Morgenthau Diaries, I, 15 08 1941, p. 455Google Scholar.
94. Niemeyer, Report, T160/1098/F16829/1, P.R.O.
95. The China Handbook recorded the arrival of a British economic mission, China Handbook 1937–1943 (Chungking: Chinese Ministry of Information, 1943)Google Scholar. Hall-Patch warned that in view of the hostile attitude of the U.S. Treasury and the atmosphere of distrust in Washington it would be optimistic to count on a successful outcome for Sir Otto's visit, Hall-Patch to Treasury, 25 July 1941, T160/1248/17733/2, P.R.O.
96. Niemeyer to Bank and Treasury, 13 November and 26 November 1941, OV 104/85, Bank Archives.
97. Niemeyer to Bank and Treasury, 13 November 1941, ibid.
98. Young, , Helping Hand, p. 218Google Scholar.
99. Waley to Cobbold, 17 November 1941; Kershaw (Bank) Memorandum, 17 November 1941; Cobbold to Waley, 18 November 1941; Keynes to Waley, 22 November 1941; Young to Waley, 28 November 1941; Waley to Keynes, 28 November 1941; Clay to Kershaw, 29 November 1941, OV 104/85, Bank Archives.
100. Treasury to Niemeyer, 5 December 1941, ibid.
101. Niemeyer to Bank and Treasury, 5 December 1941, ibid. Young “found the idea of a large loan engaging the active consideration of the highest Chinese leadership” when he returned to Chongqing late in November and thought that Kung broached the subject to Cochran in their last meeting, Young, , Helping Hand, pp. 218, 236Google Scholar. Cochran, mentioned Kung's request for a new U.S. loan to provide a reserve fund for the Chinese currency in his report but gave no figure, Morgenthau Diaries, I, pp. 507, 529Google Scholar. The formal request for a loan was not made until 29 December, Clark-Kerr to Foreign Office, 29 December 1941, OV 104/85, Bank Archives; Gauss, to Washington 29 December 1941, Morgenthau Diaries, I, pp. 545, 599Google Scholar.
102. Niemeyer, Report, T160/1098/F16829/1, P.R.O.
103. Litvinoff, the Russian ambassador in Washington, thought the loan demand “blackmail” and warned that the funds could not be used. This view was shared by Morgenthau, , at least in January, Morgenthau Diaries, I, 29 01 1942, pp. 634–35Google Scholar.
104. Clark-Kerr to Foreign Office, 29 December 1941, OV 104/185, Bank Archives.
105. Brenan Memorandum, 6 April 1942, FO 371/31618, P.R.O.
106. Churchill seems to have been unaware of Niemeyer's mission and in January in conversation with Morgenthau, referred to him disparagingly as a “penny-pinching tool of the Treasury” and agreed to send cables to recall him, Morgenthau Diaries, I, pp. 596–97. The threat was never carried throughGoogle Scholar.
107. Niemeyer to Foreign Office and Bank, 4 December 1941, OV 104/85, Bank Archives.
108. Niemeyer to Chiang Kai-shek, 17 December 1941, OV 104/85, Bank Archives. There is a series of further memoranda in OV 9/10, Bank Archives. See also Young, , Helping Hand, p. 237Google Scholar.
109. According to Niemeyer Young “carried no guns in Washington and had been ousted (as a nominally ‘Soong’ man) by the Chinese in favour of the more showy and vapid Fox who was not an economic expert anyway,” Niemeyer, Report, T160/1098/F16820/1, P.R.O.
110. Hall-Patch to Niemeyer, 20 August 1942, Fl 301.
111. Niemeyer's scheme was for a £20m loan which at the prevailing exchange rate equalled Ch. $1,600m. Of this it is unlikely that more than two thirds (Ch. $1,000m) would have been taken up. The budget deficit for 1941 was just under Ch. $10,000m and the forecast for 1942 was much higher. The note issue began the year at about Ch. $8,000m and ended it at Ch. $15,000m. At most the loan would have absorbed 15% of the note increase and 10% of the deficit. It would simply not have been large enough to have had a significant impact on the price level, and this takes no account of subscriptions drawn from idle balances. The subsequent, much larger, U.S.-backed loans were heavily undersubscribed and Young admitted that they had a minimal effect on prices. Niemeyer to Treasury and Bank, 26 November 1941, OV 104/85, Bank Archives; Young, , Helping Hand, pp. 234–240Google Scholar.
112. Morgenthau Diaries, I, pp. 616–17.
