Office of the Historian

893.24/231

Memorandum by Mr. Willys R. Peck of the Division of Far Eastern Affairs

[Washington,] June 2, 1941.

An official of Pan American Airways has written me unofficially and informally under date of May 29, 1941, that that company has received a “rumor” from a source in China “usually believed reliable” that the Chinese Government is about to make available out of funds borrowed from the United States the sum of $1,000,000 (presumably US$) for the purchase of commercial aircraft and adjuncts; the “rumor” further states that part of this money is to be turned over to the Eurasia Aviation Corporation. In view of the fact that any profits derived directly or indirectly by the Corporation would accrue in part to the German interests in the Corporation, my correspondent thought the “rumor” would be of interest and for that reason passed it on.

It seems to me that two issues are involved:

(1)
the desirability of seeing that the Chinese Government obtain as full cooperation as possible in maintaining air service out of Chungking; and
(2)
the undesirability of allowing money loaned by the United States to be used in any way whereby profit will accrue to Germany.

The second issue seems to me very important. Nevertheless, I suggest that we raise no objection to the proposed action of the Chinese Government (assuming that the “rumor” turns out to be true). The arguments for noninterference are, to my mind, as follows:

a.
China will be strengthened by this participation of Germany in Chinese civil aviation.
b.
Germany if allowed to participate in this activity of the Chinese Government will, to that extent, be weaned from collaboration with Japan.
c.
According to reports, the United States is not able itself to supply all the commercial planes the C. N. A. C. would like to acquire for extension of its west China service.
d.
While the use of American-loaned money for the benefit of a Sino-German enterprise, the Eurasia Aviation Corporation, will benefit Germany in two ways, i. e. by conferring a financial benefit and by continuing German opportunities for espionage and counter-American and counter-British activities, such benefits will not materially improve the position Germany already occupies in west China.