793.94/6836: Telegram
The Counselor of Legation in China (Peck) to the Secretary of State
[Received January 25—1:30 p.m.]
12. 1. Information [that] is believed to be reliable has been obtained that Chiang Kai-shek has been persuaded by the Japanese to adopt definite policy of “cooperating” with Japan. This would indicate that reports of Japanese offers or demands for some kind of “pact” with China are basically true. Report continues relative to impossibility of expecting concrete assistance from the League of Nations and other countries including the United States, Chiang has decided to accept Japanese loan to be used for military and other purposes;24 that important changes in the Ministry of Foreign Affairs and possibly other departments of Chinese Government may result; and that Chinese Government contemplates as part of Chiang’s program action [Page 19] to take currency measures which may possibly involve a correlation of Chinese currency with currency system of Japan.
2. According to this report Chiang’s decision to accept Japanese financial assistance was announced to group of Chinese bankers at recent meeting in Shanghai during which Chiang pointed out that if China undertook war with Japan China would certainly meet with defeats during first 3 months even though able to continue resistance thereafter and that the Chinese Government which had imbued the people of China with a certain sense of its leadership, might be unable to survive this strain and that since Japan was the only country willing and able to give needed financial assistance only feasible policy was to accept it.
3. Same informant stated that Chiang has for some time been conversing with Japanese leaders through unknown intermediary possibly Wang I-tang; that recently through this intermediary Chiang was asked by Japanese spokesman whether in the event of war between Japan and Russia China would side with Japan and in that case whether China would be willing to organize three model divisions with Japanese advisers, instructors and equipment, that Chiang gave diplomatic negative to this proposal and was subsequently informed that Japan could not accept responsibility for anything which might happen in North China.
4. Also understood that T. V. Soong25 was actually planning journey to United States but that it was canceled because of fear Japanese might think his trip for purpose of obtaining American loan and therefore “treacherous” in face of discussions of Japanese offers or demands.
Repeated to the Departments