Foreign Relations of the United States Diplomatic Papers, 1933, The Far East, Volume III

893.102S/1296

The Consul General at Shanghai (Cunningham) to the Secretary of State

No. 9069

Shanghai, August 17, 1933.
[Received September 15.]

Sir: In my telegram No. 156, of March 5 [4], 1 p.m. (1932),¹³ I endeavored to impress upon the Department the importance of the consideration of the following points by the local and home authorities concerned:

• “1. Hongkew and Yangtszepoo must be as completely restored to the Shanghai Municipal Council administration as the State of Emergency will permit and that at the earliest possible moment.”¹⁴
• [“]2. It is hoped that the powers concerned will give careful consideration to the future of the International Settlement and the safeguarding of the Settlement and all lives and property located therein and adjacent thereto. If it was not known before, recent events have convinced all careful observers that the Land Regulations have served their purpose and have become obsolete; …”

In my cable referred to I gave what is regarded as an important summary of past events and suggestions for future precautions which will be of possible interest in considering this despatch.

I have the honor to attempt to review the happenings since that date, so far as they concern the International Settlement and the adverse functioning of the Japanese authorities therein, as well as to attempt to place before the Department as accurately as possible present conditions in that part of the International Settlement and the territory adjacent thereto which was occupied by the Japanese on and shortly after January 28, 1932.

It is asserted without fear of challenge that the Japanese from January 28, 1932, usurped all the municipal authority of the Shanghai Municipal Council in the area north of Soochow Creek and refused to allow the International Settlement Police, Fire, Finance and other administrative Departments to function therein. Therefore, it does not seem necessary to establish the statement that the municipal functions had been entirely usurped by the Japanese military forces. Despatches from this office clearly set forth this fact, and the statement contained in the telegram above quoted clearly sets forth that

“Hongkew and Yangtszepoo must be as completely restored to the Shanghai Municipal Council administration as the State of Emergency will permit and that at the earliest possible moment.”

The State of Emergency was withdrawn on June 13, 1932, and the municipal administration in the area mentioned should have been restored completely from the termination of the State of Emergency. The Department will be interested as to whether such municipal administration has as yet been restored completely to the Shanghai Municipal Council. I am of the opinion that it has not been restored, and will endeavor to present to the Department the reasons for this belief.

There is much to indicate that the Japanese have a fixed and determined policy which they intend to carry into effect regarding the International Settlement as a whole, or that part of the Settlement which is dominantly Japanese. The Japanese have been aggressive since the Sino-Japanese conflict of last year and have been rather mandatory in their claims upon the Shanghai Municipal Council. They have not completely restored the administration of that district to the Shanghai Municipal Council, and their demands through their officials and civic organizations are increasing and becoming more exacting.

The Japanese Residents’ Corporation, which functions under the Japanese law known as the “Residents in Foreign Lands Corporation law,” governs the Japanese within as well as without the Settlement, according to Dr. Shinobu.”^* The Japanese Chamber of Commerce has also spoken for the Japanese community upon several occasions.

One of the indications of Japanese aggressiveness is that soon after the Sino-Japanese conflict was concluded the Japanese began the construction of a huge building on the plot of land where the Japanese Military Headquarters was situated during and prior to the Sino-Japanese conflict. This building is of a very substantial and permanent nature, and is being erected on North Szechuen Road, and extra-Settlement road, but in Chinese territory between the road and the Shanghai-Nanking railway, in close proximity to Hongkew Park. If any permit for the construction of this nuilding was issued at all, it was by the Municipality of Greater Shanghai. It is not beyond conception that the permit was part of ilie unpublished agreement of May 5, 1932,¹⁵ nor is it beyond possibility that the construction has proceeded without a permit being given by any municipal authority. The building is apparently constructed for use as a barracks. It is four stories in height, of reenforced concrete construction, 400 x 200 feet, and the ground floor is reported as being suitable for storing artillery. It is understood that it is in this building the fire department is to be housed, reference to which is made on page 10 of this despatch. The building is admirably suited for a civic administration building, as well as for military barracks. As compared with the barracks and radio station that the Japanese maintained in Hankow prior to 1922, it is much larger. The Shanghai building, however, is located not in a Japanese Concession but in Chinese territory abutting on a Municipal Council road. It was surprising to learn that this building is to receive its electricity from the Chinese electric plant in Chapei and not from the Shanghai Power Company’s plant. It is not believed that in case of an emergency the building will depend entirely upon the Chinese plant, but that it will have in reserve its own power plant. It has not been confirmed, but it is understood that the water supply for the building is to [be] secured from the Chapei Waterworks, or from a well, or from both. Photographs of this building will follow in this or a later mail.¹⁶

Another indication of aggressiveness on the part of the Japanese is their attitude in regard to the extra-Settlement roads question.¹⁷ The Japanese Consul General made unreasonable objections to the modus vivendi in regard to the extra-Settlement roads which had been negotiated by the Municipality of Greater Shanghai and the Shanghai Municipal Council. The Japanese demands in regard to the nationality of the police force rendered it impossible to carry into effect the modus vivendi unless the Shanghai Municipal Council, as it was advised to do by certain consular officers, should proceed to carry it into effect irrespective of the opposition of the Japanese.

As a further indication of the intentions of the Japanese one may mention a letter dated May 26, 1933, addressed to the Chairman of the Shanghai Municipal Council by the Secretary General of the Japanese Residents’ Corporation, a copy of which is enclosed.¹⁸ This letter urged that the Council should have a definite policy in regard to the administration and defense of the Settlement should another emergency arise, such as a demand by the Chinese for the retrocession of the Settlement, and suggested that the onerous responsibility for the administration of the affairs of the Settlement lies too much on the nationals of one country, the British people. The memorandum transmitted by the Secretary General of this organization states:

“As a matter of fact, we have several matters to be brought before the Council from the standpoint of the Japanese community, but inasmuch as we consider that to bring up many matters at a time would not be advisable, we hereby express our wishes, first of all, in respect to the reformation or readjustment of the police affairs of the Council, which it is eagerly hoped, would be honoured with favourable consideration of the Council’s authorities.”

The memorandum insists that there should be no discrimination against the Japanese members of the police force who are now “being treated like a step-child,” and states:

“Setting aside our suggestion for fundamental reformation in this connection, we would propose that one Japanese Deputy Commissioner and two additional Japanese Assistant Commissioners be newly appointed and that the discriminatory treatment to which Japanese police officers in the employ of the Council are being subjected be absolutely done away with.”

If Dr. Shinobu is correct, and since he is an adviser to the Japanese Government he should be regarded as an authority, the functioning of the Japanese Residents’ Corporation in the Settlement and without constitutes a Japanese municipality within the Settlement which is capable of extensive expansion in various directions. The functioning of this Corporation is intelligently administered, probably with the assistance of Japanese officials, and it has created a special committee to present Japanese views to the Municipal Council.

Another indication is that the Japanese Residents’ Association has repeatedly made demands on the Shanghai Municipal Council for increases in the Japanese personnel of the police and other administrative departments of the Council. It should be borne in mind that the Japanese Residents’ Corporation is a Japanese organization created under Japanese law, and no doubt functions from Tokyo, while the Japanese Residents’ Association is a local organization having no connection with the home government, and it stands in the same position anent the Japanese residents of the community as does the British Residents’ Association to British residents.

Another indication is that the Japanese Landing Force, consisting of some 2,000 men (minimum estimate), is more conspicuous in the northern area than are the forces of any other Power in the vicinity of their barracks. It is customary at all hours to see squads of Japanese marines marching from one place to another in that district. This would naturally have a salutary effect on the Japanese residents, but it must have an alarming effect on the residents of the district of other nationalities, particularly the Chinese. There is entirely too much display of military force to be consistent with a state of peace.

Another indication is that the Japanese Consular Police force has been increased from 7 members prior to 1932 to a force variously estimated at from 150 to 200. These Consular Police oftentimes function, so far as Japanese residents in the Settlement are concerned, without consideration of, and adversely to, the Shanghai Municipal Police, who are the legal preservers of law in that part of the Settlement.

Another indication is the large number of Japanese cabarets, restaurants, and bars operating presumably under Japanese consular licenses and certainly without municipal licenses. The Japanese requirements in regard to closing hours for these establishments are observed and not the closing hours prescribed by the Shanghai Municipal Council. Another indication is that these Japanese cabarets, restaurants, and bars, operating under Japanese consular licenses, oftentimes refuse to pay to the Shanghai Municipal Council the taxes that are due, and also refuse to make the usual payment for licenses exacted for such undertakings in the Settlement. There does not seem to have been any serious effort on the part of the Shanghai Municipal Council to force the payment of these taxes and licenses through the Japanese consular court. The reason for this is rather difficult to find, unless it is the fear that failure in one prosecution might result in further loss of municipal revenue. It is realized that the legal enforcement of the Land Regulations and Bye-Laws is exceedingly difficult, and should it occur that for some reason the Japanese disapprove of any particular tax, and refuse to enforce its payment by Japanese, the Council is helpless. The Chinese courts can threaten the very existence of the Settlement by refusing to enter judgment against Chinese who default in the payment of taxes or licenses. One of the most vulnerable points in the existence of the Shanghai Municipal Council is the fact that the enforcement of the Bye-Laws depends upon the attitude of the courts of various nationalities. It is not beyond conception that the failure of the court of an important nation to enforce the Bye-Laws might be the rock upon which the Shanghai Municipal Council administration would be wrecked.

Another indication is that when the Land Appraisers of the Shanghai Municipal Council increased the valuation on much property in the Hongkew and Yangtszepoo districts where Japanese interests predominate, the Japanese Chamber of Commerce under date of July 10, 1933, addressed a letter to the Secretary General of the Shanghai Municipal Council, a copy of which is enclosed,¹⁹ 19 protesting against the new assessment as being too high, and the letter covering this question defiantly states:

“From a practical point of view, therefore, it would seem that they are actually not able to comply with the new assessment, and it is feared that an attempt at the present time to enforce such assessment might place both the Council and the Japanese community in an extremely embarrassing situation.”

This is virtually defying the Shanghai Municipal Council in its attempt to collect taxes under the new assessment. It is understood that the demand of the Japanese Chamber of Commerce has resulted in the matter being reconsidered by the Council, and the suggestion has been made that the Council would eventually agree to a small rebate of 20 per cent of the increased taxes upon condition that the taxes are paid by September 30th. This rebate, of course, applies to all residents in the particular district which was affected by the Sino-Japanese conflict, irrespective of nationality, but the residents are largely Japanese. A Japanese member of the Municipal Council was consulted and it is understood he stated that this concession would meet the desires of the Japanese. This is a very small concession it is true, as the increase is not great, but it indicates the surrender of a principle and the timidity of the Council in dealing with Japanese demands.

Another indication is the general dissatisfaction of the Japanese community with the administration of the entire Settlement by the Shanghai Municipal Council. This criticism is very pronounced indeed.

Another indication that the Japanese have definite plans and intend to establish a semi-independent municipality within the Settlement, probably using the new barracks building above referred to as a governing center, is that the Japanese authorities on July 20, 1933, sought the advice of the Acting Chief of the Fire Department of the Shanghai Municipal Council as to what kind of fire fighting apparatus should be installed in the barracks. (It is admitted the inquiry was made by a very junior Japanese and probably without authority). The acting head of the Fire Department recommended certain stationary apparatus, and was informed that this was not the equipment they desired but rather engines, ladders, et cetera, comprising a complete equipment to be housed in this building. In response to an inquiry made by the Acting Chief, the Japanese informed him that the Japanese people did not feel that they would be adequately protected by the Shanghai Municipal Council Fire Department, and said that this had been proved at numerous times during 1932. It will be recalled that the Japanese on several occasions have claimed superiority to the Shanghai Municipal Council authorities in municipal administration. This is one of their pet ideas, similar to their standard phrase about language difficulties when they are accused of an abuse of the rights of other nationals.

What the fixed policy of the Japanese is one can but conjecture. They have been suggesting at various times during recent years that they should have increased membership on the Municipal Council. They have not been aggressive in this demand, but it is not beyond possibility that the Japanese could elect more than two members of the Council if they should vote only for the Japanese candidates. After the British the Japanese have the largest number of votes. The Japanese vote as a unit on all questions, and invariably follow the instructions of the Japanese Residents’ Corporation. There were in April, 1933, 850 Japanese ratepayers entitled to vote in the municipal election, and this is believed to be their maximum voting strength. There is no way of ascertaining definitely the number of those of each nationality, except the Japanese, who might qualify as voters. It is possible that the Japanese could eliminate the two American members, since the American voters number 312, and do not vote as a unit. The total number of ratepayers registered in April 1933 were 3,785. It is reasonably certain that the ratepayers of no nation except the Japanese are fully registered. The total number of ratepayers might easily be increased by 500 to 1,000. Due to the critical attitude of the Japanese towards the British administration of the Settlement, it is not unlikely that they might so vote as to eliminate one British and one American Councillor as an initial step. An American cannot be elected without the support of the British and/or the Japanese. In 1933, the two American candidates received practically the undivided support of the Japanese. They also received the major part of the British vote. In order that some conception may be had of the possibility of the success of an effort on the part of the Japanese to increase their membership on the council through ratepayers’ votes, it may be mentioned that the successful candidates in the last municipal election held on March 27 and 28, 1933, received the following votes:

T. Funatsu (Japanese)	1,352	votes
O. Okamoto (Japanese)	1,334	“
E. B. Macnaghten (British)	1,030	“
F. J. Raven (American)	1,028	“
H. E. Arnhold (British)	1,014	“
A. D. Bell (British)	1,003	“
C. S. Franklin (American)	959	“
E. F. Harris (British)	759	“
P. W. Massey (British)	758	“

To secure control of the entire Settlement in this manner would require considerable political effort, which might be less easy of accomplishment than the method suggested hereinafter. A simpler method might be to defy the Shanghai Municipal Council administration and take control of such part of the International Settlement north of Soochow Creek as they considered desirable, as they did in 1932. Their control might be extended to include that part of Chapei in which the Japanese are in large numbers. This would be beyond the Settlement area. This could be done in the manner used by them in 1932 in Shanghai and in Manchuria. They might even attempt to justify such conduct under Article III of the Protocol in regard to Japanese Settlements at the Open Ports of China signed at Peking on October 19, 1896,²⁰ if such justification was worth while.

In connection with the question of the Japanese versus the Shanghai Municipal Council, the volume International Law in the Shanghai Conflict, by Doctor J. Shinobu, is rather interesting. Omitting entirely Dr. Shinobu’s chapters in regard to the happenings in Shanghai, one can turn immediately to Chapters IV, V, VI, VII and VIII, and read his views in regard to the International Settlement and the Land Regulations. Dr. Shinobu is an adviser to the Japanese Government. He arrived in Shanghai with the first Japanese naval reenforcements and was “sometime Legal Adviser to the Imperial Japanese Third Fleet in Shanghai.” It is believed, therefore, that he should have knowledge of the views of the Japanese Government, and his statements should possibly be given more than ordinary consideration. His discussion of the Land Regulations is interesting. He says that:

“The recognition, or confirmation, of the Regulations by the foreign representatives in Peking is simply a diplomatic confirmation, with no binding force as an international compact between sovereign nations, …”²¹ (page 128).

He further states that the Land Regulations are simply a conventional agreement between the ratepayers and the foreign representatives concerned. It is possible that he takes the view that the Japanese Government is not bound by the Land Regulations, though this is but a surmise.

It is not believed that much can be done locally towards straightening out the affairs of the Shanghai Municipal Council. There is enclosed a copy of a confidential memorandum²² of a conversation between myself and the Secretary General of the Shanghai Municipal Council which reflects somewhat my views and those of the Secretary General. This memorandum of conversation will perhaps serve the purpose better than a reiteration of views in this despatch. As to whether anything can be done in the way of bringing the administration of the northern area more directly under the Council than has been possible recently, is a question of some doubt. The Council must do all in its power to assert its rights. It is believed, however, that some of these questions may be taken up by the diplomatic representatives concerned in order that the usurpation of the functions of the Shanghai Municipal Council by the nationals of any country might be prevented in the future. There is no justification for such usurpation by any Power during normal times, and there is but little justification for such usurpation in abnormal times, if the Powers concerned will realize that the military forces of the Powers are here for the purpose of supplementing and strengthening the police and municipal administration.

This report is forwarded so that the Department and the Legation may be informed of conditions as I view them, and for such instructions as may be appropriate.

Respectfully yours,

Edwin S. Cunningham

13. Foreign Relations, 1932, vol. iii, p. 506.
14. Omission indicated in the original despatch.
15. International Law in the Shanghai Conflict (pp. 96 and 127), by Dr. J. Shinobu, LL.D., published by Maruzen Company, Ltd., Tokyo (1933). [Footnote in the original.]
15. Signed at Shanghai, Foreign Relations, Japan, 1931–1941, vol. i, p. 217.
16. Not printed.
17. See pp. 610 ff.
18. Not printed.
19. Not printed.
20. MacMurray, Treaties, etc., vol. i, p. 91.
21. Omission indicated in the original despatch.
22. Not printed.