893.00 P.R./33

The Minister in China (Johnson) to the Secretary of State

No. 257

Sir: In accordance with the Department’s instruction No. 78, of October 9, 1925,12 I have the honor to submit the following summary, with index, of events and conditions in China during May, 1930:

Politico-Military Situation

Military operations, in the Nanking Government’s struggle with its opponents both in North and South China, were of a considerably more serious character in May than in April when minor skirmishing heralded the coming storm. No decisive action occurred, however, and at the end of May the issue was as much in doubt as it was at the beginning of the month.

At the end of the month there was severe fighting along the Lung-Hai Railway, the gist of the available information in the matter being that the Nanking forces were at first successful, that they later met with serious reverses, and that there were many casualties on both sides. General Chiang Kai-shek’s German-trained model division seemed not to have done as well as was anticipated.

The fall of Changsha (Hunan) to Kwangsi forces was imminent at the end of May. In Shantung the Shansi troops had begun a partial envelopment of Tsinan. Apart from the fighting on the Lung-Hai Railway, the foci of interest and strategic importance were Changsha and Tsinan.

Banditry and Communism

Information received from various sources during May tended to the belief, in connection with the political situation, that the greatest danger facing Nanking lay in the rapid growth of banditry and communism. Many believed that the threat to the continuance of the [Page 15]Nanking Government from that source was much greater than from the military opposition of Marshal Yen Hsi-shan and his associates. The precarious condition of the silk industry in Kiangsu Province was sighted [cited] to the Legation as an instance of this, the general insecurity being so great that the silk merchants of Soochow did not dare travel through the countryside.

As a result of these conditions, which were quite general in many parts of the Yangtze Valley, artificial prosperity had come to Shanghai, where real estate values had greatly advanced, due to the fact that wealthy Chinese were flocking there for the purposes of self-protection and for the investment of wealth no longer secure elsewhere.

Aims of the Northern Coalition

The following extracts from a report of an interview, at Peiping, on May 16th, granted newspaper correspondents by Marshal Yen His-shan’s Diplomatic Representative here, are of interest as indicative of what the Northern coalition desired to have made known regarding its aims and aspirations:

“The downfall of Chiang Kai-shek is a matter of course and a foregone conclusion. The most important issue confronting us after the fall of Chiang Kai-shek is the work of reconstruction. It consists of four general points:—

Maintenance of law and order and suppression of bandits, so that life and property can be made safe.
Purification of the civil service and eradication of avarice and corruption, in order to establish a clean government.
Lightening of taxation by abolishing all extra and oppressive taxes which might prove too much of a burden for the people.
Making public all financial matters. Accounts of receipts and expenditures of all the government offices to be made public so as to make peculation impossible.

The overthrow of Chiang Kai-shek’s government would be meaningless unless the fundamental objects above-mentioned are attained.

Marshal Yen Hsi-shan has declared that the organisation of a new government must be strictly on a legal basis.

It can now be reasonably expected that such a government will come into being within a very short time.

Regarding the war situation, everything is proceeding satisfactorily.”

. . . . . . . . . . . . . .

Prohibition of Export of Gold Bullion and Import of Foreign Silver Coins

With regard to the continuing fall in the value of silver and the incident heightened concern in the projected adoption of a gold standard for China, the quotation below (illustrative of the measures taken [Page 16]by the Nanking Government) is made from a report, dated Shanghai, May 20th, by Trade Commissioner Williams:

“The Executive Yuan on May 15th, under special instructions from the State Council, issued instructions that the Maritime Customs Administration be immediately ordered to prohibit the export of gold bullion and the import of foreign silver coins.

The proposal for the adoption of the measure was originally submitted to the Central Political Council in separate petitions by Mr. Sun Fo, Minister of Railways, and Dr. H. H. Kung, Minister of Industry, Commerce and Labor, and was subsequently referred to the Economic and Finance Committees of the Council for joint examination.

In the course of a report submitted on behalf of the joint committees, favoring the adoption of the proposal, Mr. T. V. Soong, Minister of Finance, pointed out that in order to avoid serious losses as well as to follow the general tendency of the times, it was obviously necessary to adopt the Gold Standard for the country and that in view of the small quantity of gold bullion in China, it was necessary first to prevent the export of gold so as to facilitate the gradual adoption of the Gold Standard. An embargo on the importation of foreign silver coins was also considered necessary to prevent confusion in the country’s currency.”

It may be pointed out, in this relation, that the average selling rate, United States currency for Chinese currency, of the foreign exchange banks, advanced from $2.39, Chinese currency, for G$1.00, on May 31, 1929, to $3.50, Chinese currency, for G$1.00, on May 31, 1930.

. . . . . . . . . . . . . .

I have [etc.]

For the Minister:
Mahlon F. Perkins

Counselor of Legation
  1. Not printed.