Passionate U. S. debate over a loan to Finland (TIME, March 11) obscured what was in many ways a bigger U. S. financial and political transaction—the $20,000,000 Export-Import Bank loan last week to China.
What made the loan big was not the sum—the same as the Finnish loan—nor Chinese needs for the road-builders, trucks and other U. S. goods (exclusive of implements of war) which China will buy with it. What made it big was the tremendous leverage that U. S. currency exerts in terms of Far Eastern money, the tremendous boost that 20,000,000 hard U. S. dollars (worth $140,000,000 soft Chinese) give to the Chinese economic system, which for four years has been besieged in a currency war almost as economically devastating as the Japanese invasion has been in terms of human suffering.
In Washington last week undramatic RFC Administrator Jesse Jones made no flowery speech as he handed over the money (although he did say, eloquently for a banker, "They can buy everything that humans need in everyday life"). Nor did modest K. P. Chen, Chinese banker who negotiated the 1936 U. S.-Chinese (gold-silver) agreement, the 1938 $25,000,000 Export-Import Bank loan, hail the new loan for the victory it was. Mr. Chen wanted to keep out of the limelight, minimize his part in the proceedings and get back to China as soon as possible. But because the European war has checked China's flight of capital, improved the balance of her foreign trade, hit speculators in Chinese currency, new U. S. expression of confidence in China's economic stability had an impact far out of proportion to the amount of money involved.
Last fall, when the Chinese dollar began the long skid that carried it below 7¢, it looked as if Japan had won the currency war. But by last month, although inflation swept Chungking (private chauffeurs, getting $1,000 a month, earned as much as Cabinet Ministers), the Chinese dollar still looked to peasants like a last struggling agent of order amid surrounding economic anarchy—100 Chinese dollars would buy 125 Japanese-backed Federal Reserve notes; one U. S. dollar, officially buying $4.30 in Japanese Federal Reserve notes, would actually buy $17.50 in that currency.
Middle-aged Banker Chen (University of Pennsylvania '09) looks so much like a Westerner's idea of a Chinese banker that wily and subtle-minded Americans have difficulty in believing he is as simple and direct as he is. Of average height, moderately fat, bespectacled, careful, shy of the press, close-mouthed (in the Calvin Coolidge rather than Sumner Welles sense), he has no hobbies, makes no picturesque Oriental remarks, works 24 hours a day at the unglamorous business of cementing U. S.-Chinese trade relations, and considers Chinese repayment of U. S. loans his personal responsibility. His pride: that China has repaid $2,300,000 of her previous $25,000,000 loan, is now, because of U. S. needs for tung oil and tin, ahead of schedule.