893.51/6908
Memorandum of Conversation, by the Adviser on Political Relations (Hornbeck)
In the course of a conversation which I had recently with the Chinese Ambassador, Dr. Hu gave me an account of the situation which had prevailed at Chungking after the fall of Hankow and the capture of Canton, and just preceding the announcement of the Export-Import credit of $25,000,000, and in the giving of the account indicated that the extending of that credit had had a tremendous effect on Chinese morale and policy. He said that there had been a head-on conflict within the Chinese Government over the subject of continuing resistance or making peace on the best terms obtainable, which terms would have been highly unfavorable to China; and he indicated that announcement of the credit had greatly helped Chiang Kai-shek to gain the decision for continued and intensified resistance.