Memorandum by the Ambassador in Japan (Grew)

In the course of my conversation on various subjects with the Minister for Foreign Affairs this morning he said that I might like to know of certain rumors and reports which had reached him.

1. The Minister said that reports were circulating in Japan to the effect that certain American bankers, unspecified, are considering or have decided to advance credits to the Chinese Government to the extent of one hundred and fifty million gold dollars to help China pay her debts and to stabilize the Chinese currency and at the same time certain English bankers were considering similar action to the extent of thirty million pounds sterling. The Minister did not say whether he had definite confirmation of the accuracy of these rumors.

2. Mr. Hirota then turned to the question of peace negotiations with China and said that before the Brussels Conference he had suggested to the American, British, German and Italian Ambassadors that Chiang Kai-shek66 should take the initiative in approaching the [Page 435] Japanese Government for peace negotiations. About December 27 the German Ambassador in Tokyo had asked Mr. Hirota if he would state the Japanese peace terms which could be conveyed to Chiang Kai-shek through Ambassador Trautmann and that the Minister had then stated the Japanese terms as follows:

Abandonment by China of all anti-Japan and anti-Manchukuo activities and cooperation with Japan for combating communism.
The establishment of certain demilitarized zones.
The settlement of Sino-Japanese economic relations.
Indemnification for the results of the hostilities.

I asked the Minister if he would care to elaborate on these various points. He said that the demilitarized zones should be created in Inner Mongolia, North China and the district now occupied by Japanese forces south of the Yangtze River between Shanghai and Nanking. Inner Mongolia was to have an autonomous government under the sovereignty of the Chinese Central Government. The régimes in the other demilitarized zones were to have a considerable degree of autonomous power but they also would be under Chinese sovereignty. As for an economic settlement this would include the development of China’s natural resources and also a tariff agreement with Japan.

3. The Minister said he was aware that Kung66a had approached the American Government through Ambassador Wang66b to ask the American Government’s advice with regard to the acceptance of these terms and also to request the mediation of President Roosevelt. Mr. Hirota said that the Japanese Government had asked the Chinese Government for its reply to these terms about January 10th and that they were now awaiting a reply at any moment. Mr. Hirota said that he was telling me this merely because he thought I would like to be informed with regard to the situation.

J[oseph] C. G[rew]
  1. Chinese Generalissimo; premier from 1935 to January 1, 1938.
  2. Dr. H. H. Kung, Chinese Minister of Finance and vice premier, 1933–38; premier, 1938.
  3. Dr. C. T. Wang, Chinese Ambassador and former Chinese Minister for Foreign Affairs.