Foreign Relations of the United States Diplomatic Papers, 1936, The Far East, Volume IV

741.94/69

The Ambassador in China (Johnson) to the Secretary of State

No. 710

Peiping, September 11, 1936.
[Received October 5.]

Sir: I have the honor to refer to despatch No. 1970 of August 6, 1936, from the American Ambassador at Tokyo in regard to Anglo-Japanese relations. Mr. Grew points out that, although Great Britain does not at this time seek an ally in the Far East she would like to have a friendly Japan willing to guarantee and protect her interests in China and from whom she might seek relief from the growing danger of Japanese trade in the markets of the British Empire. The Ambassador considers whether there is ground for agreement between British and Japanese desires and mentions indications of a rapprochement between the two countries.

There are also suggestions of such a rapprochement in China.

British interests in China are considerable, particularly in South China, and her investments alone are valued at six times those of the United States. Should Japanese advocates (including the Japanese Navy) of Japanese expansion to the south gain control of Japan’s policy of expansion, as Mr. Yoshida, the Japanese Ambassador to England, believes they will,^* such Japanese expansion would be a serious threat to the interests of Great Britain, especially those in Hongkong and the vicinity. Already Great Britain has suffered from Japanese trade rivalry. Following the Great War, Japanese cottons made such steady inroads in the markets of India, long monopolized by Lancashire, that by 1932 Japanese exports to that country actually exceeded British exports by some 45,000,000 square yards. The result was the raising of the tariff wall against Japanese goods not only in India, but throughout the Empire. However, contrary to expectations, the total purchases of Japanese goods by India for the first half of 1934 were much much greater than for the first half of 1933 and in spite of the restrictions imposed by the Indian authorities the volume of cotton goods exported to India by Japan for the same period showed a considerable increase over the first six months of 1933.

It is not only on exporting cotton to India that Japan has concentrated, but so successful has been the drive for export trade which she started in 1932 that her total exports of all sorts for the following year showed an increase of 63%. Her exports since that date have increased annually, although not at quite so rapid a rate. Obviously this is at the cost of other manufacturing nations. The visible Japanese trade with China (smuggling activities excluded) appears to have remained static during the last three years, but when one realizes that the value of her total trade with Manchukuo showed an increase in 1934 of approximately 44 million Yen over 1932, some 42 million of which represented exports, it is obvious that this is not the case. British exports to China on the other hand have shown a gradual decrease from 108,258,100 H. K. taels in 1930 to 80,004,000 H. K. taels in 1934. It would appear that it is British trade that is paying to a large extent the cost of Japanese trade expansion and of the many points at which the interests of Great Britain and Japan are in direct conflict, the most serious is their competition for markets in the Far East, particularly in China. When Japan seized Manchuria, the British Foreign Office, under the leadership of Sir John Simon, appeared to think that Japan would stop at the Great Wall and not disturb British interests in China proper. The extension of influence over Hopei and Chahar by Japan and the recent smuggling activities which that nation has condoned in North China have gone far to prove the fallacy of this belief. Great Britain’s stake in North China, however, is not great: certain tobacco interests, approximately a 50% interest in the Kailan Mining Administration, and a share in the former Peiping-Mukden and the Peiping-Pukov Railways constitute her outstanding commitments. Of course she has the British Concession interests in Tientsin and various coastal shipping lines such as Jardine, Matheson, & Co. Ltd., and Butterfield and Swire, whose ships call at Tientsin. However, if it came to a question of going to war over these interests she would perhaps be willing to sacrifice them, but her southern sphere of influence is another question and from the long-term point of view the situation for Great Britain presents many difficulties.

The sending of Sir Frederick Leith-Ross, Chief Economic Adviser to the British Government to China, was doubtless due to a feeling of a need for serious study of these conditions. It is also noteworthy that the newly appointed British Ambassador to China has stopped over in Tokyo for a visit with his Colleague there before proceeding to his post in China.

Whether Great Britain has evolved a policy for dealing with her Far Eastern questions, it is difficult to say. Sir Alexander Cadogan, recently said that he had no idea of the British policy in regard to the Far East. Sir Alexander added, however, that he was inclined to believe that British sentiment and American sentiment were similar in that neither nation would fight in the Far East.^† From the British point of view, the troubled situations closer at home would appear to preclude any other stand. Confronted with grave European problems, she is presumably attempting to evolve some other method of protecting her interests in China short of war. It is as yet unknown what this method is, but as Great Britain has always appeared to steer the course of an opportunist, some solution by compromise may present itself. There appears to be evidence that this solution entails a more friendly attitude towards Japan.

In my despatch No. 584 of July 17, 1936,⁹⁷ I pointed out that the members of the British Embassy staff here expressed the belief that they had gone much farther in the Sasaki Case⁹⁸ than they would have done in the course of normal events to comply with the wishes of the Japanese and to prove to their own satisfaction that the British soldiers implicated were not guilty.

The Consul General at Shanghai, in a letter to me dated August 17, 1936, a copy of which is enclosed,⁹⁷ citing the fact that the British forces in Shanghai took no action in reference to the functioning of Japanese patrols in the British Defense Sector in Shanghai, says that he cannot escape the impression that a definite effort is being made by the British authorities to avoid any differences of opinion with the Japanese and to defer to them in local matters.

In the same letter Mr. Gauss points out that he has good reason to believe that the British Consul General consulted with the Japanese Consulate General and agreed upon a text of a letter to the Municipal Council in regard to the question of Factory Law and Factory Inspection in Shanghai before proposing as Senior Consul at the Consular Body meeting the letter in question. The question was one which entailed a change on the part of the British Consul General from the course he had previously given Mr. Gauss the impression he intended to follow. Mr. Gauss gained the impression that his action was prompted by a desire to show solidarity with the Japanese. In speaking of these incidents, Mr. Gauss says:

“And, running along from day to day, observing the play-up of news in the British press in China, their editorials, et cetera, one gets an impression of a change of attitude; not so much one of conciliation or of support of the Japanese, but of avoidance of criticism of Japanese policy.

“As I said, I may be mistaken; but this is my impression—the ‘feel’ of the situation—here …⁹⁹

Sir Alexander Cadogan in his conversation with Mr. Atherton on July 2 said that he “was not in favor of attempting to cooperate with Japan for a profitable exploitation of China; neither was he in favor of an attempt to short-circuit Japan in China unless Japanese policy tread on British interests.” That such an attitude would prove pleasing to Japan there seems little doubt, especially if credence is to be given to the statement of Mr. Yoshida to Mr. Norman Davis that the Japanese Army leaders now think they should cultivate the friendship and cooperation of Great Britain and the United States and particularly not alienate the British any further by their Chinese policy.

When the interests of two countries clash as directly as do those of Japan and Great Britain there must either be a complete break or there must be an agreement to cooperate in a division of the spoils. The overtures of Japan at this time would appear to indicate that Japan wants a breathing interval and that she feels that she has achieved a position sufficiently strong vis-à-vis England to force a compromise very favorable to her needs for a larger market for the products of her factories. The question is, is Great Britain ready to make the concession which Japan will demand. As indicated above, there is evidence of a British desire to be conciliatory but there is as yet little evidence that she feels the situation is so serious as to make a truce an immediate necessity.

Respectfully yours,

Nelson Trusler Johnson

1. See Department’s strictly confidential instruction No. 205, June 29, 1936, to the Embassy. [Footnote in the original. Instruction No. 205 not printed; see memorandum of June 25 by the Chief of the Division of Far Eastern Affairs, p. 220.]
2. Memorandum of conversation held on July 2, 1936, between Sir Alexander Cadogan and Mr. Ray Atherton enclosed in the Department’s strictly confidential instruction No. 223, of July 22, 1936. [Footnote in the original. Instruction No. 223 not printed; see memorandum of July 13, by the Counselor of Embassy in the United Kingdom, p. 241.]
97. Not printed.
98. British Embassy guard members were accused of killing a Japanese at Peiping in a brawl.
97. Not printed.
99. Omission indicated in the original.