Memorandum by the Counselor of Legation in China (Peck) of a Conversation With the Chinese Administrative Vice Minister for Foreign Affairs (Tang)76

What follows is the gist of a somewhat lengthy conversation.77 Mr. Tang observed that considerable time had elapsed since their last conversation (on September 21, 1933, see despatch to the Legation No. L–19 Diplomatic, of September 23, 1933)78 and he had for some time desired to continue with Mr. Peck the subjects they had then discussed.

Mr. Tang pointed out that many rumors had gained circulation as the result of the substitution of Dr. H. H. Kung for Mr. T. V. Soong as Minister of Finance, to the effect that this change was caused by a difference of opinion within the Government itself on the matter of Sino-Japanese relations. Rumors were to the effect that the Government is now prepared to enter into direct negotiations with Japan for the settlement of all kinds of outstanding questions.

Mr. Tang said that the resignation of Mr. T. V. Soong was not connected with foreign policy in any way. It was only concerned with fiscal questions. (Mr. Li interposed in English that, as Mr. Peck probably knew, there were certain “family” questions involved. The conversation between Mr. Tang and Mr. Peck was in Chinese. WRP.)

Mr. Tang explained that there is only one party in China, i.e. the Nationalist Party. Nevertheless, within the Government itself there must arise differences of opinion in regard to governmental policies. These differences sometimes result in changes of personnel, as had happened in the case of Mr. Soong.

Mr. Peck said he understood this explanation and added that he had heard that Mr. Soong had been unwilling to acquiesce in the desire of General Chiang to utilize large funds for military purposes, in excess of the present budget.

Mr. Tang said that this was precisely the case. He observed that Mr. Soong recently had reorganized the bonds of the National Government, extending the period during which they are to run, lowering the interest, etc. He had then declared that so far as should be within his power no more bonds would be issued. When it recently became, therefore, unavoidable that additional bonds should be [Page 447] issued for military purposes, Mr. Soong had no alternative but to resign in the interests of consistency.

In regard to the rumored direct negotiations at Peiping between the Chinese and Japanese Governments, Mr. Tang said that General Okamura, of the Kwantung Army, was bringing up certain matters for negotiation with the Peiping Political Council and the Peiping branch of the Military Affairs Committee. The most important related to railway through-traffic, postal matters, and customs matters.

Mr. Tang thought that some arrangement would be made for the resumption of through traffic from Peiping to Manchuria.

Postal matters, Mr. Tang said, would not be discussed, since there is in existence a League of Nations resolution in regard to these.

Customs matters concerned arrangements covering the customs house at Shanhaikwan. He pointed out that it might be alleged that it was improper for China to discuss with Japan any arrangement concerning the customs house at Shanhaikwan. From a practical standpoint, however, unless such arrangements were made, Japanese goods would enter China without restriction. It was necessary from the practical standpoint, he pointed out, to come to some arrangement.

Mr. Peck remarked that he had read in the papers a Japanese statement that the matter of customs houses along the Great Wall would be taken up with China. Mr. Tang evaded this point, but intimated that only the Shanhaikwan customs house was under discussion. Mr. Peck observed that presumably the difficulty regarding the entrance into China of Japanese goods would arise along the Great Wall, but that this would be a very difficult matter to discuss with Japan.

Mr. Tang said that he wished to make it clear that the National Government’s policy of not discussing with Japan matters involving principle, e.g., Manchuria, was unalterable. China would continue to look to the “friendly nations” in such matters. In questions of practice it might be necessary to change from time to time.

Mr. Peck remarked that it seemed to be the general foreign opinion that complete non-intercourse between the Chinese and Japanese Governments was, of course, impossible, owing to the fact that the two countries are neighbors. Consequently, it seemed desirable to provide for this inevitable day-to-day intercourse.

Mr. Li remarked that the Japanese pursued the policy of negotiating with regional authorities, instead of with the Government.

Mr. Peck said that he had noticed a statement in the papers attributed to a prominent Japanese statesman to the effect that the Japanese Government found the Chinese authorities differing in policies and [Page 448] found the National Government unable to enforce its policy in different localities; the Japanese Government would, therefore, henceforth follow the practice of dealing with local authorities or Government factions separately.

Mr. Tang confirmed the fact that the Japanese Government had criticized the Chinese Government as not being of one will in respect to foreign policy. Mr. Tang said that, on the other hand, the Japanese Government itself was very much divided. For instance, there is a diplomatic party and a militarist party, while within the militarist party there are the Kwantung Army and other factions.

Mr. Peck said that he had read in the newspapers that the Japanese Government was intending to take up with the Chinese Government the matter of the Chinese import tariff. He inquired whether the Japanese Government had done this.

Mr. Tang said that there had been no formal correspondence between the two Governments on this subject and that even those aide-mémoire exchanged in the course of conversations had not had any formal character. Mr. Tang confirmed the fact, however, that the Japanese Government regarded the question of the Chinese import tariff as being a very serious one. He said that the Japanese Government professed to regard the present tariff as being, from a factual standpoint, unjust to Japan, as bearing more heavily on Japanese imports than on, for instance, British and American imports. As for the statements emanating from Japan that the Japanese Government would insist upon an alteration of the customs tariff, this was merely an attempt to create an “atmosphere”, with a view to influencing the Chinese Government. The Japanese claimed that the Chinese Government was utilizing the customs tariff as a retaliatory weapon against Japan.

Mr. Peck observed that the Japanese and the British were engaged in negotiations in India regarding tariff questions and he wondered whether the Japanese also claimed that Great Britain was using the tariff as a retaliatory weapon. Mr. Peck recalled that Viscount Ishii when he returned to Japan from the Economic Conference in London was reported in the press as stating that he found foreign countries aroused against Japan less by the Manchurian incident than by the economic penetration of Japanese trade into their respective areas.

Mr. Peck said that he had observed in the press, also, a statement that the Japanese Government was going to instruct the Minister to China to press the Chinese Government for the repayment of loans advanced to China by Japan.

Mr. Tang said that in this regard, also, there had been no formal correspondence between the two Governments. He thought that the [Page 449] statement to which Mr. Peck referred was another attempt to create an “atmosphere” with a view to influencing the Chinese Government.

Mr. Peck said that he had seen an item in the press to the effect that the Japanese Government might insist upon taking over the Chinese telephone service, and he recollected that there was some stipulation in the Telephone Loan authorizing Japan to do this in the event of default in the amortization of the loan. Mr. Tang said it was true the Japanese had this technical right, but he thought they would realize the practical difficulties which would interpose to such a step.

Mr. Tang said several times in the course of the conversation that he cordially invited Mr. Peck to ask him any questions regarding China’s diplomatic matters which he had in mind. He said the present was no time for “diplomatic procedure” and that frankness should prevail. He professed a great desire to clear up, or prevent, misunderstanding in regard to China’s position or policies.

Mr. Peck said that he was grateful to Mr. Tang for his attitude and he remarked that it was of great assistance to him, Mr. Peck, in the performance of his duty of reporting fully on these matters to the Department of State.

Mr. Peck said that Mr. Johnson, the American Minister, would be coming to Nanking in a few days and would undoubtedly be glad of the opportunity to talk with Vice Minister Tang on all these subjects.

Mr. Tang said that he would be very pleased to see Mr. Johnson.

  1. Copy transmitted to the Department by the Counselor of Legation in his despatch No. D–566, November 7; received December 4.
  2. Li Sheng-wu, newly appointed director of the Department of General Affairs of the Chinese Foreign Office, was also present.
  3. Not printed.