793.94/7192: Telegram
The Consul General at Shanghai (Cunningham) to the Secretary of State
[Received July 17—6:23 a.m.]
404. A foreigner in a position to be well informed stated in a letter dated July 11 to Captain J. M. McHugh that General Chiang Kai-shek viewed [reviewed?] the situation in reference to Japan and that Chiang put forth the arguments that to fight now is what Japan wants; to fight and lose would give Japan the notion that she had won the war and would demand signed settlement. To fight would let the Reds loose in this [area] to the complete control of Szechuan and perhaps the Northwest. To let the Japs steal what they felt inclined to steal without acknowledging it and without signing anything keeps Japan in the wrong, and if China will profit by the humiliation to reorganize and develop unity and patriotism it will be worth while, for in time they can get back what has been taken. Chiang [Page 315] argued that the Reds must be exterminated first; second, the country must be reorganized; third, the Army must be reorganized; fourth, determined efforts must be made to develop the whole of the West—Yunnan, Kweichow, Szechuan, Kansu, as well as Shensi, Hupeh and Hunan—but particularly Szechuan, Kansu and Kweichow, where there is plenty of mineral and agricultural wealth if properly developed on modern lines. He urges to keep at this work and if the Japanese try to enforce their control on the Yangtze region to resist.