893.01 Manchuria/1264

The Consul General at Mukden (Ballantine) to the Minister in China (Johnson)71

No. 112

Sir: I have the honor to refer to my despatch No. 102 of May 26th [25th] and political review for May72 containing discussions of the political-economic crisis in “Manchukuo” revealed by recent cabinet changes,73 the visit to Manchuria of Japanese War Minister Hayashi and other developments, and to submit supplementary information in connection therewith. This information, which was obtained directly from an observer whose reliability and exceptional closeness to official circles render him an authority most deserving of credence, substantially corroborates previous reports from numerous less trustworthy sources regarding the significance of the cabinet changes. It is in line with other evidence that the present crisis in Manchurian affairs is primarily attributable to the Military’s anxiety lest public dissatisfaction over the failure of the “Manchurian Venture” to provide opportunities for private economic profit commensurate with added capital and tax demands result in collapse of the military controlled development of the country, and that it marks a move by the Kwantung Army to confirm its role as administrator of Manchuria on such a permanent and all-exclusive basis as definitely to eliminate hope of further effective opposition and thus silence disturbing elements who regard military domination of Manchurian economy as a necessary temporary extravagance to be replaced as rapidly as possible by civil administration which would offer more tangible help to the Japanese tax payer and entrepreneur.

The informant stated in effect that the Army’s goal is to reduce the “Manchukuo” Government to a point where, instead of functioning as a Japanese directed administration subject to general supervision and occasional discipline by the Kwantung Army, it will become an actual part of the Army’s administrative machinery to such an extent that the Military can rest assured that none of its actions will fail to coincide with the Army’s desires. Work towards this goal has been pushed swiftly during the past year, and success was brought substantially nearer last fall with accomplishment of the simultaneous drastic reorganizations of the Japanese Manchurian and “Manchukuo” governmental administrative systems, entailing establishment of the War Department’s supremacy to the practical exclusion of other Japanese ministerial influence in Manchuria, liquidation of unmanageable [Page 227]provincial units, greater centralization of both Japanese and “Manchukuo” systems in Hsinking under direct surveillance of Army Headquarters, as well as extensive changes in personnel.* These steps, however, far reaching as they were, still left room for considerable activity on the part of “Manchukuo” organs independent of and not infrequently at variance with the Military’s wishes. This was due to the circumstance that a few of the higher Chinese “Manchukuo” officials, being men with ideas of their own, were naive enough to assume that their positions as titular heads of office entitled them to some voice in the conduct of such office affairs, and also that among the Japanese “Manchukuo” personnel occupying key positions of authority were a considerable number who, not having been selected by the Army, had their own conception of how affairs should be administered and were not properly imbued with the necessity of consulting the Military on matters of consequence.

Chief among the more independent minded Chinese officials was the Prime Minister, Cheng Hsiao-hsü, who, as he himself has admitted on several occasions in confidence, long foresaw the degree of domination towards which the Army was working and struggled his best to prevent its accomplishment. Exasperated by the military dictated governmental reorganization undertaken last fall, he tendered his resignation in September, but was finally persuaded to withdraw it. Shorty after the return of “Emperor” Kang Teh from Japan, he again proffered his resignation which was this time accepted.

Taking advantage of the opportunity presented by the Prime Minister’s resignation, the Japanese War Department immediately ordered the cabinet changes, described in the Consulate General’s despatch No. 102 of May 26th [25th], which were deliberately aimed to remove from influential positions such other relatively able and independent men as Hsi Hsia and Tsang Shih-yi and fill the vacancies created with “yes men”, devoid of any initiative, who would be well satisfied with the salary increase offered them and neither desirous nor mentally capable of taking part in government affairs.

The cabinet changes will, according to the informant—and also other sources of information—, be followed systematically by general shakeups in all ranks of the central, provincial and local governments. This will involve not only removal of many Chinese but also replacement of Japanese who are not sufficiently good “Army men” by other Japanese who will know enough to cooperate closely with the Military; and it appears that the latter process was initiated with the appointment of Mr. Nagaoka to the all important position of Director of the General Affairs Board of the State Council in place of Mr. R. Endo, and replacement [Page 228]of Mr. K. Sakatani by Mr. S. Odachi as Deputy Director of the same organ.

The informant stated that actual development at Hsinking following the cabinet changes and appointment of Nagaoka and Odachi very conclusively bear out the accuracy of this diagnosis of the Army’s intentions. Promptly after the changes, the new Director of the General Affairs Board of the State Council transferred the seat of his office from the State Council building to Kwantung Army Headquarters. At the same time the custom of reaching decisions on matters of import through meetings of the State Council—dominated though they had been by Japanese vice ministers and advisers—was abandoned, and instead the procedure adopted of referring all such questions to Mr. Nagaoka at his desk in the Army building, whose decision thereon is, it may be assumed, merely a transmittal of orders given him by General Minami. Similar new practices are being followed in all ministerial activities, official circles having been given clearly to understand that all matters other than routine must be referred up to Army Headquarters for decision, and it is evidently the Army’s intention to ensure extension of such procedure throughout the country by the removal of obstinate Chinese and the placement of Army-minded Japanese in charge of all General Affairs sections and other consequential organs.

The informant feels convinced that the developments above described portend serious consequences for foreign interests in Manchuria. He is of the opinion that henceforth it will be of practically no use for foreign consular representatives or firms to submit important requests or complaints to “Manchukuo” central or other authorities, and that the only way in which they can hope to secure favorable action is through prior direct appeal to military quarters.

The informant’s explanation of the recent government changes in question is, as stated, in accord with indications from other sources, and seems to account for all of the reported circumstances in a rational manner. However, only time can demonstrate the degree of accuracy of his observations and predictions; and this office will watch the situation closely and report such additional comments or modifications of views as events may seem to justify. On the basis of present indications, I am inclined to agree with the informant’s pessimistic outlook and to feel that, until such time as the Military’s hold on Manchurian civil administration may be broken by force of public opinion in Japan or international developments, the fate of every issue of consequence will, even more than hitherto, be decided according to the policies of the Kwantung Army. If this is the case, the [Page 229]Army’s attitude towards such questions as the abandonment of extraterritoriality, status of foreign consuls, continuation of foreign business enterprise in the country and possible attempts to force recognition through pressure on local foreign interests becomes, of course, of even more vital concern than formerly; and the likelihood of important developments in respect to such issues in the near future would appear appreciably increased.

Respectfully yours,

Joseph W. Ballantine
  1. Copy transmitted to the Department by the Consul General at Mukden in his unnumbered despatch of June 10; received July 9.
  2. Neither printed.
  3. See telegram No. 210, May 22, 9 p.m., from the Minister in China, p. 178.
  4. Despatch No. 11 of November 22, 1934. [Footnote in the original; despatch not printed.]
  5. Despatch No. 102 of May 25, 1935. [Footnote in the original; despatch not printed.]