893.00/13989
The Ambassador in China (Johnson) to the Secretary of State
[Received February 20, 1937.]
Sir: I have the honor to refer to the Embassy’s despatch No. 552 of July 3, 1936,20a reviewing the political, military, economic, and financial developments in China during the first six months of 1936, and to submit a similar review of the last six months of the year just ended.
Whereas the outstanding developments during the first half of 1936 increased the precariousness of China’s position, the significant events of the second half, in their larger aspects, have had the opposite effect. The following factors have definitely tended to unify and strengthen the Republic and even to cause the Japanese, at least temporarily, to adopt a decidedly less aggressive policy towards China: the dénouement of the Southwestern crisis whereby recalcitrant Kwangtung and Kwangsi Provinces were taken into the Central Government’s fold and the scope of Chiang Kai-shek’s authority accordingly widened; the abortive attack on Suiyuan by Japanese directed and supported Mongol “irregulars” under the leadership of General Li Shou-hsin, the bandit Wang Ying, and Prince Teh, which brought practically the entire nation enthusiastically to the support of the Suiyuan defenders and evoked an amazing manifestation of nationalism; and the outcome of the detention at Sian of Chiang Kai-shek by Chang Hsueh-liang from December 12 to December 25 which fostered another spontaneous outburst of nationalism throughout the country and caused universal rejoicing when the Generalissimo was released on Christmas day. Each of these crises at their inception gave promise of disastrous results for the progress of China; in the end each in turn, with the possible exception of the aftermath from the Sian affair, proved a political asset to the country and an enhancement of the power of Chiang Kai-shek.
There continued to exist during the first days of July the pessimism which had deepened during the last days of June because of the fear that the difficulties between Nanking and the Southwest, whose primary purpose was to overthrow the Generalissimo and perhaps, secondarily, to wage war against Japan, could not be settled without resort to civil war. If the rebellion could not be quashed there was the possibility of a complete breakdown in authority with attendant [Page 454] political impairment of Nanking’s authority and economic bankruptcy and consequent encouragement to Japan for further aggression. However, at the Second Plenary Session of the Fifth Central Executive Committee of the Kuomintang (July 10 to 14), which had been called in an endeavor to place the Southwestern leaders in the position of traitors if they should disobey the Session’s mandates and to open the way for conciliation, decisions were made which constituted a decided political victory for Chiang Kai-shek. The Executive Committee abolished the legality of the semi-independent political organs in the Southwest and removed General Ch’en Chi-t’ang from his position. They offered the Southwestern leaders a means of obtaining absolution by cooperating with the Central Government. The decisions made also confirmed the Generalissimo’s policy toward Japan and enabled him to continue to avoid taking an open and definitive stand regarding armed resistance to Japanese aggression and interference in political affairs in China. General Chiang, through his skill in political maneuvering and the threat of military action, succeeded in bringing Kwangtung under his control.
During July and August General Chiang was unable to liquidate the Kwangsi situation. Negotiations and military preparations went on simultaneously. During the first half of September, however, after protracted negotiations an agreement was reached whereby Kwangsi also came under the control of the Central Government. The Southwestern rebellion was thus ended, leaving the country more completely unified than it had been at any time since the establishment of the Nanking Government.
The threat against Suiyuan, although existent for some time, was late in materializing. The situation in Northern Chahar, where General Sung Che-yuan appeared reluctant to interfere, remained obscure even throughout October, but there seemed little doubt that “pro-Manchukuo” Mongol and bandit forces based on Shangtu, Changpei, Pailingmiao and Chapsur were continuing preparations for an attack on East Suiyuan, in which preparations Japanese planes and armaments formed a part. General Fu Tso-yi, Chairman of the Suiyuan Provincial Government, had been endeavoring for many months to perfect the defense of his Province. In October Central Government troops were despatched to his support. Hostilities were finally opened by the “irregulars” on November 15, and by November 24 the Suiyuan forces had successfully repulsed the invaders and had taken Pailingmiao, the strategically important base of the “irregulars” and the capital of the Inner Mongolian Autonomous Political Council. This caused national rejoicing. Great popular support was given the defenders of Suiyuan as a fresh wave of patriotism swept the country. The failure of the “irregulars’”drive became obvious in December with the unsuccessful attempt to retake Pailingmiao, the defection of [Page 455] some of the “irregular” leaders and troops, and the capture by Suiyuan forces of Tamiao, the principal “irregular” base some 60 miles northeast of Pailingmiao.
On December 12 General Chang Hsueh-liang and General Yang Hu-cheng, the Pacification Commissioner of Shensi, revolted against Nanking and forcibly detained Chiang Kai-shek and other important Central Government officials who were in Sian with the Generalissimo. The leaders of the rebellion issued a statement demanding a reorganization of the Government to include all factions, presumably even the Communists, and for a united front against Japan. Shensi and Kansu responded to the plea, but the rest of the country loudly proclaimed its adherence to the Generalissimo and voiced the bitterest contempt for Chang Hsueh-liang and the revolt. The Generalissimo’s release on Christmas day was greeted with enthusiasm throughout the country which had again become more closely knit through common patriotic zeal.
A very regrettable aftermath of the Sian coup was the reported alliance between the mutineers and the communists who had been concentrated for some time in the vicinity of Sian. At the end of the year, in the absence of knowledge as to what agreement, if any, had been made for the release of Chiang, the Central Government was at a loss to know whether further trouble was to be expected from that source. Chang Hsueh-liang who requested punishment was sentenced by court martial to ten years’ imprisonment but was pardoned. His civil rights, however, have not been restored.
Other less important occasions which also fostered Chinese nationalism were the celebration of the National holiday on October 10, with a diplomatic reception (for the first time since the Mukden incident) and of the anniversary of Chiang Kai-shek’s birthday on October 31 at which time a large number of airplanes bought with funds publicly subscribed were presented to the Generalissimo.
It would appear that, at least partially due to the above indicated expansion and strengthening of the Chinese national consciousness, and to the failure of the Sino-Japanese negotiations at Nanking, the Japanese have lessened their pressure on China. Since the large October military maneuvers and the founding in October of the Hui T’ung Aviation Company, whose planes now furnish through service between Manchuria and Tientsin and Peiping with Japanese pilots and Japanese planes, the Japanese have been relatively quiescent in North China. Whereas smuggling in this region has continued on a vast scale and is still causing a great loss in revenue to the Chinese Government, the Japanese authorities have recently shown less ardor in endeavoring to protect Japanese and Korean smugglers when their activities are interfered with by Chinese officials.
[Page 456]The replacing of General Matsumuro last month by Colonel Matsui as the Japanese resident officer of the North China Garrison in Peiping is also believed to be of considerable political significance, as indicating the gradual recession of Japanese influence in North China which became particularly noticeable during the last half of December. A further indication of this recession is the reported decision of the Hopei-Chahar Political Council to enter upon a general program of retrenchment.
There are also indications that the East Hopei Anti-Communist Autonomous Government presided over by Yin Ju-keng may be on its descendency. Rumors of serious dissension within the administration of the bogus regime continued to circulate during December. It is becoming more apparent that Yin’s hold is highly tenuous, and it is altogether possible that the elaborate and costly celebration of the regime’s first birthday on November 25 and its reported donation of $1,600,000 to the support of the “irregular” forces attacking Suiyuan may be the harbingers of its demise.
The improvement of China’s position vis-à-vis Japan developed despite ill feeling which sometimes was brought to a dangerous pitch through a long series of Sino-Japanese incidents varying from murder to trivialities. This improvement developed notwithstanding the failure of the negotiations held in Nanking between the Japanese Ambassador and the Minister for Foreign Affairs and their subordinates during the last four months of the year. The negotiations were disrupted by China’s conviction, allegedly, that Japan had been aiding the “irregular” forces in their attack on Suiyuan. The Ministry of Foreign Affairs on December 6 issued a statement outlining the present position of the Chinese Government relative to the subjects which had been under negotiation. This release has been briefly summarized by the Embassy at Nanking as follows:
- “1. The Chinese Government is prepared to inaugurate a civil air line between Shanghai and Fukuoka as soon as the unauthorized and illegal flights of Japanese airplanes over Chinese territory are stopped.
- “2. The revision of China’s tariff is a domestic affair. When tariff readjustment is studied the suppression of smuggling and the freedom of the Customs Preventive Service will be the first questions studied.
- “3. With reference to the unlawful anti-Japanese activities of Koreans in China, the Chinese Government does not like to see these acts committed on Chinese soil. At the same time the Japanese Government should suppress the other unlawful activities of its subjects, Koreans, Formosans and others, committed on Chinese territory under Japanese protection.
- “4. The employment of foreign advisers depends upon their ability, not their nationality. Should Sino-Japanese relations improve, it would not be impossible for China on its own initiative to employ Japanese technical experts.
- “5. Orders have repeatedly been issued stressing the necessity of maintaining friendly relations with foreign nationals. However, cognizance must be taken of the fact that much cause exists inciting the people against Japan.”
Other unfavorable circumstances were: (1) the presence of the Communist troops in the Northwest against whom the Government troops confined their offensive mainly to “pushing”; (2) the wholesale North China smuggling by Japanese and Koreans; and (3) the Japanese cotton mill strikes in Shanghai and Tsingtao and the landing of Japanese forces at the latter port, against which action the Chinese Government protested.
At a meeting on October 15 the Standing Committee of the Central Executive Committee decided to postpone indefinitely the convocation of the National People’s Congress which was to have met on November 12.
Economic and financial conditions in Kwangtung began to improve in August under the direction of General Chiang Kai-shek. In the same month resumption of service was offered on the Lung-hai Railway loans and Canton–Kowloon Railway bonds.
In September decision was made to revise the law governing the encouragement of shipbuilding. Through train service was inaugurated on the Canton–Hankow Railway, and definite plans were made to construct a modern port at Whampoa.
During October it was announced that the British Government in order to promote British exports to China had decided to guarantee credits advanced by British firms to Chinese importers. Chinese officials and business leaders publicly expressed gratification on this decision. It was believed that this action was intended to demonstrate Great Britain’s desire to advance its commercial relations with China and to serve as a warning to Japan that Great Britain was not disinterested in China’s future. China also expressed her approval of the monetary agreement recently concluded between the United States, France and Great Britain. The Ministry of Finance viewed the accord as a stabilizing influence in international exchange which would tend further to strengthen China’s currency. He pointed out that China had profited by more than U. S. $1,000,000 through the sale of a part of its gold reserves abroad, and that China would be assisted in the discharge of its foreign loan obligations. (Chinese currency remained stable during the period under review except for slight and brief fluctuations at the time of the Sian coup).
During November it became obvious that the continuation of the shipping strike in the United States was injuring trade relations with the United States and adversely affecting American prestige and good will. The service of the China National Aviation Corporation was [Page 458] extended to Hong Kong, a Pan American Clipper having made its first call at Hong Kong the month before.
A number of loan operations in connection with the financing of the construction of the Nanking–Kiangsi Railway, which will link Nanking with the Canton–Hankow line and thus make a direct connection between Nanking and South China, were concluded during December. It was announced on December 16 that a loan contract for Yuan $34,500,000 for the construction of the Chengtu–Chungking Railway had been signed by the Szechuan–Kweichow Railway Corporation and a French banking syndicate. Indications at the end of the year were that the United States, notwithstanding the American shipping strike, would continue to enjoy the largest share of Shanghai’s foreign trade, with Germany showing the greatest gain over 1935.
During the period under review there were no marked changes in the relations between China and the western nations. There were indications, however, of an increasing rapprochement between China and Great Britain. Great concern, moreover, was shown by Chinese officials and the public regarding the conclusion of the anti-Communist pact by Japan and Germany and the reported de facto recognition of “Manchukuo” by Italy. Chinese officials and the Chinese press expressed gratification over the election of China to a non-permanent seat on the Council of the League of Nations. The reelection of President Roosevelt was accepted by the Chinese newspapers and public with great enthusiasm.
Respectfully yours,
Counselor of Embassy