Marshall Mission Files, Lot 54–D270
The President of the Chinese Executive Yuan (Soong) to the American Ambassador in China (Stuart)
Dear Ambassador Stuart, For the past year since V–J Day and pending the full restoration of internal communications, it has not been possible appreciably to supply our textile manufacturing centers with raw cotton from China’s producing areas. In view of the vital position of cotton textiles in our economy, we had to look abroad [Page 1015] for the importation of cotton. We are therefore most grateful for the 33 million U. S. dollars cotton credit extended earlier this year by your Government through the Export–Import Bank.
While the said credit has helped substantially to alleviate our needs, you will be interested to note that our total expenditure for imported cotton from all sources abroad, not including the UNRRA supply of 300,000 bales, for the period from March 4th to September 28th, 1946 approximated US $70 million. With the recent favourable rice crop we anticipate that the resultant improvement in the purchasing capacity of our people will lead to an increased demand for cotton textiles.
In face of the increasing excess of demand over supply, my Government is making every effort to stimulate the production of both raw cotton and cotton textiles. We plan to increase the spindles in operation from 2,600,000 to an estimated 3,400,000 by the end of July 1947, which will incidentally provide more employment for the masses and help to stabilize social order. On the basis of the monthly production of 26 pounds of cotton per spindle, the annual consumption is estimated at about 2,000,000 bales plus three months’ reserve of 600,000 bales, totalling 2,600,000 bales.
Against this estimated need we can only foresee the imported stock of 750,000 bales, plus an additional 200,000 bales of UNRRA cotton and the domestic production of 550,000 bales (with the last figure capable of increase but limited to this estimate by such disruptive factors as lack of communications). The total supply accountable at present would thus be 1,500,000 bales.
On this basis, the net import for the year ending July, 1947 would have to approximate 1,100,000 bales. According to prevailing prices, this would cost China about US $220 million, which is far above China’s present capacity to pay. It will be necessary for us to ask for more allocations from UNRRA but even if increased help is obtained from that agency the remaining deficit would still seriously disturb China’s international balance of payment.
It is for this reason that we look to your Government for further aid in the form of a new cotton credit of US $100–150 million from the Export–Import Bank. While such a credit would be similar to the 33 million credit in other respects we hope for a longer term for the liquidation of the credit. In view of the large sum involved, we will need a term of say five years in order to effect an orderly repayment program.
In this connection, I wish to cite our record in 1936 in maintaining production for approximately 4,000,000 spindles without the importation of cotton as a basis for our expectancy that the gradual stabilization of conditions in China will bring about a progressive reduction [Page 1016] in the need for imported cotton. Through the stimulation of domestic production in general and the encouragement of exports, my Government is confident that the liquidation of these credits will not unduly strain our finances at the end of five years when increasing equilibrium will have been attained in China’s international balance of payment.
I would appreciate your kind cooperation in conveying the desires of my Government as outlined above to your authorities in Washington and would be prepared to implement our proposal and initiate appropriate negotiations if your Government should be so inclined.
Yours sincerely,