The Department will note from what was said to me that there has really
come about a change in Sino-Japanese relations, and that it would appear
that the Japanese military are the most active agents in bringing this
change about, still retaining the initiative in and control of Japan’s
policy toward China. The agents, self appointed or chosen to make this
policy effective, are military officers with whom the regular
representatives of foreign Governments cannot maintain proper contacts,
not only because of the irregularity of their status, but also because
the Japanese military officer maintains a studied aloofness toward all
foreigners and toward all Chinese except those with whom he chooses to
make contacts. The Chinese with whom the Japanese military maintain
relations are generally persons of known or reputed pro-Japanese
leanings, unknown to the regular channels of foreign intercourse with
China. Even the names of these people are for the most part
undivulged.
In having these conversations I took particular care not to evince any
excessive interest in the matters discussed. I particularly refrained
from direct questions, and statements were made to me entirely upon the
initiative of the Chinese. I found evidence of an unwillingness on the
part of responsible Chinese to be specific in this matter; there was an
evident fear of revealing sources, and apparently a general desire to
create in my mind the impression that no actual or responsible
negotiations had taken place.
To accomplish these purposes Japan will hold over Chiang Kai-shek and his
Government the threat of obtaining these ends by dealing with local
authorities and thus destroying the very life blood of the Chinese
Government.
Perhaps it is pertinent in this connection to add that recently the
British Government, in considering a proposal made to it by the Chinese
for a loan, served notice on the Chinese Government that the British
Government would be prepared to consider financial aid to China at this
time only in case such financial assistance were accomplished by
international cooperation, and then only with the participation of Japan
and contingent upon China settling differences with Japan.
As regards Soviet Russia, it is my belief that the Soviet Government is
only too happy to have Japan occupied in Asia, for this will serve to
postpone any threat which Japan may offer to Russian interests.
[Enclosure]
Memorandum by the Minister in China (Johnson)
Sino-Japanese Relations: Summary
Based on Conversations, Memoranda of Which Are
Attachéd68
Upon my return to China in the middle of February of this year from a
vacation in the United States I found that during the four months of
my absence a distinct change had occurred in Sino-Japanese
relations. There was a great deal of excited discussion, not only in
Japan, but also in Shanghai and Nanking, and in the Chinese press
generally, of a more friendly atmosphere developing in the relations
between the two countries. The discussion centered around
Sino-Japanese “collaboration” in economic fields.
[Page 82]
It appeared to be the opinion of responsible Chinese with whom I
talked in Shanghai and in Nanking that the initiative in this new
turn of events had come from the Japanese side. Reference was made
to statements which First Secretary of Legation Suma stationed in
Nanking had made in the course of visits to General Chiang Kai-shek,
Wang Ching-wei, Acting Minister of Foreign Affairs, Chen Kung-po,
Minister of Industries, and H. H. Kung, Minister of Finance. Mr.
Suma made these calls upon his return to China after a vacation in
Japan, and presumably he had the latest information of the Japanese
attitude learned from responsible authorities. At about the same
time the Japanese Military Attaché, Suzuki, called upon responsible
Chinese officials and is reported to have made statements regarding
Japanese policies. During the time that I was in Shanghai and
Nanking, Major General Doihara, formerly employed in China as an
adviser to the Chinese Government and recently attached to the
Kwantung Army, who in recent years has achieved a position of
mysterious stature with a reputation for intrigue with Chinese
worthy of an Oppenheim story, was making a tour of China visiting
high Chinese officials North and South, after having attended in
Dairen a much-publicized conference with fellow officers of the
Kwantung Army.
Chinese reaction to these visitations was of two kinds. In the first
place, there was expressed a general belief, on the part of those
not immediately connected with the conversations, that these
spokesmen of Japanese policy had delivered what amounted to an
ultimatum, to the effect that the Chinese must show an immediate
appreciation of Japan’s pacific and friendly attitude or take the
consequences. It was said that the Chinese were given six months in
which to meet what were purported to be the Japanese terms.
On the other hand, among those Chinese who seemed to be closest to
the conversations in question, I could get no evidence of any
demands having been presented, although all expressed a certain
amount of conviction to the effect that these gentlemen had made it
evident that Japan is intent upon a policy which, if successful,
would in the end result in economic if not political control in
China.
Speculation varied as to the reason why the Japanese military should
have changed their policy in regard to China at this time. It was
generally believed that the military, having accomplished all that
they had intended to accomplish in Manchuria and North China, were
now prepared to look at China proper, not so much from the point of
view of military conquest as from the point of view of economic
conquest. It was said that there was evident in Japan a certain loss
of prestige on the part of the military. (That may be indicated by
the fact that the Japanese Government appears to have transferred to
the Kwantung
[Page 83]
Army in
Manchuria most of those figures, such as Itagaki and Minami, who
were originally involved in the Japanese adventure, thus separating
them from direct control of military policy at home.)
And it was argued that, as a corollary to this loss of prestige in
Japan, there was a revival of influence on the part of Japanese
business and civilian leaders—particularly of Osaka merchants, all
of whom have been in favor of more peaceful methods in Japan’s China
policy—with a view to obtaining a return of China’s good will and a
better market for Japanese goods. There seemed to be a belief that
among the merchant and civilian leaders in Japan there was a growing
apprehension not only regarding Japan’s internal economic situation,
but also regarding the future of Japan’s much-needed foreign market
for the products of her industries. It was said that the increasing
handicaps placed by the United States and the British Empire and
other countries upon Japanese goods are forcing Japanese industries
back upon China as an outlet for their products. It was argued that
the Japanese military, perceiving this trend, and anxious to retain
their position of leadership in Japanese domestic politics and the
direction of Japan’s policy toward China, took the initiative, thus
robbing the civilian and merchant element in Japan of any prestige
which such a move might give.
Another reason given for this change in the attitude of the Japanese
military was that in March of this present year (1935) Japan’s
resignation from membership in the League would become effective,
while in December her denunciation of the Washington Treaties69 would
also become effective. The Japanese military leaders were therefore
anxious to clean up questions pending with China before the end of
the year, and if possible face the questions that would present
themselves in 1936 with a peaceful China behind them.
In all accounts that came to me of the conversations which Suma,
Suzuki and Doihara had with Chinese, I gathered that they intended
to convey to the Chinese that they were speaking for the Japanese
Government; and I wish to say in this connection that in all
conversations which I have had with Mr. Suma I have been impressed
with the fact that he intends to convey the idea that he speaks for
Japan. I have never heard him mention to me the activities or the
statements of the Minister, who in all of these matters seems to
play a very minor role if any.
From the Chinese side the reaction to these methods appears to be one
of frightened acquiescence. In the first place, they feel only too
poignantly their inability to meet Japanese force with force, and
with
[Page 84]
hatred in their hearts
they seek whatever means offers to placate Japanese force. On the
other hand, in recent months they have been terribly reminded of the
economic weakness of the Government, by the reaction of silver in
the possession of Chinese to the silver-purchasing policy of the
United States.
When the white metal was cheap it came in large quantities to
Shanghai for investment; the security of the International
Settlement tended to concentrate the silver there. Such quantities
were received from abroad and the Chinese interior that it was
begging for opportunities for investment. Under these conditions the
Chinese Government found it easy to finance Government
enterprises.
When the price of silver went up it became immediately advantageous
for Shanghai merchants to use their accumulation of silver to meet
obligations abroad. There was also the temptation to realize at once
the profits which the rising price of silver offered to those who
had bought silver when it was around twenty-four cents an ounce. The
result was a flight of silver from Shanghai, and the disappearance
of China’s only market for her Government securities. In other
words, the Government had put too many eggs in its Shanghai basket,
and it now found itself in desperate straits.
It was natural enough that in this situation the Japanese advances
along more peaceful lines should be welcomed. Although it would
appear that no Japanese loan has been offered, at the same time it
is apparent that Japanese credit contingent upon China’s efforts to
kill anti-Japanese feeling in China would be immediately available,
provided that, in return for Japan’s taking more Chinese products,
the Chinese would make more of their purchases from Japan.
The Chinese present two attitudes of mind: the bankers and certain
members of the Government are very much opposed to a loan; but a
desperate Minister of Finance, abetted by the former Minister T. V.
Soong, has been making frantic efforts—the one in America and the
other in England—to obtain financial assistance to tide the
Government over the present crisis.
Chinese students of the situation were and are convinced that
something must be done toward increasing the sale abroad of Chinese
goods. They appreciate the fact that industrialized Japan offers the
closest and most likely market for China’s raw materials. They are
therefore prepared to meet Japanese approaches half way. But they
are conscious of the fact that certain industries in China are
rapidly growing in their ability to meet Chinese demand for many
types of foreign products, especially those for which Japan will
seek a market from her own industries. Herein will be found factors
that will offer serious difficulties to both Japan and China in any
efforts that they may undertake at economic collaboration. Chinese
cotton is
[Page 85]
available in
increasing quantities and in better quality for Japanese use, but it
is not yet available in quantity much beyond present consumption in
China, and in quality it is still below the requirements for goods
of quality superior to that for which China chiefly offers a ready
market. Any increase in cotton acreage must be at a sacrifice to the
production of food in a country where the margin between the number
of mouths to be fed and the quantity of food produced is rapidly
decreasing. Japan will have to devise means of supplying food to the
cotton farmers; otherwise, in the cotton growing districts we may
find the need of food acting as a limitation upon the acreage
available for cotton.
It is of course possible that the better organized Japanese industry,
plus lower tariffs which the Japanese may force the Chinese to fix
for Japanese products, may result in throttling Chinese industry,
whether in cotton, silk, cosmetics, or heavy industries. It is
difficult, however, to see how Japan can expect standards of living
in China to increase to the point where China can offer the more
expensive market which Japanese industry is beginning to require, if
such a policy of throttling Chinese industry is pursued.
“Manchukuo” presents an economic problem to Japan which is going to
be difficult to solve. In the first place, the large Chinese
population in Manchuria will try by every means within its power to
remit its earnings to the old homes in China, for Manchuria’s
population is essentially connected—economically and
ethnologically—with China. During the past year Japan has spent in
Manchuria over 200,000,000 Yen for construction work, and during the
same period Chinese labor in Manchuria has, it is reported, remitted
to China something like $150,000,000. Manchuria no longer takes the
products of China’s cotton mills, as was the case before 1931. It is
reported that the Manchurian market for piece goods is now being
supplied by Japanese-controlled mills in Shanghai, which, by some
arrangement with the Japanese Government, send their products to
Japan for exportation to Manchuria as Japanese products. These mills
in Shanghai are understood to be controlled by Japanese textile
industries in Japan, but the material and labor used in the
production of the goods is Chinese, so that it is doubtful whether
the Japanese textile industry benefits in this matter beyond the
middleman’s profit, and the transaction certainly does not appear to
offset remittances which come from Manchuria to China.
Other raw products which China might possibly furnish Japan are iron,
coal and oil. China of course is anxious to develop these resources
for her own use, but it remains to be seen whether she will be able
to command the wherewithal at home or the necessary financing and
assistance from abroad to enable her to do this, for I believe that
the
[Page 86]
Japanese will
effectively obstruct any effort of China to accomplish this purpose
with the help of any one but herself, and of course this would mean
that Japan would automatically obtain control over the resource in
question. It is known that Japan is at the present time seeking to
obtain China’s permission to build a railway either from Tangku or
Tsinan for the purpose of tapping the large coal reserves of Shansi.
This would give Japan an excellent supply of what is understood to
be good coking coal. As regards oil, the only known supplies of this
product are in Sinkiang, an area much more likely to come under
Soviet control than Japanese.
N[elson] T[rusler] J[ohnson]
