693.002/481: Telegram
The Ambassador in China (Johnson) to the Secretary of State
[Received 4:41 p.m.]
72. Shanghai’s 166, January 28, 9 p.m. MacKillop of British Embassy informs me Moreno [that he?] saw Kung on February 1 and recommended to him acceptance of Maze’s recommendation that 1931 tariff as amended be put into effect in the interest of uniformity of tariff. Kung told MacKillop that he would give matter further consideration after receiving views of British Government upon following four points: (a) Chinese Government would have no assurance that Japanese would permit 1931 tariff to be applied in North China. Japanese on contrary might extend to Shanghai and other occupied areas schedule now applied in North China. (b) Chinese Government by this action might be drawn into undignified competition with puppet governments in reduction of rates, (c) Lower rates would diminish securities for loan obligations and increase burden of Central Government which is already making up deficiency of revenue of customs. It is understood that present customs revenue just about equals service of foreign loans and cost of administration, (d) Lower rates would stimulate imports and increase strain on national currency by creating demand for foreign exchange.
MacKillop states that his conversation with Kung took place before publication here of interview given by General Matsui45 in Shanghai on February 1 to Woodhead46 in which Matsui is reported to have said that it was originally his purpose to take over the Shanghai customs immediately but that he had resorted to more moderate lines because of the Panay and Ladybird incidents.47 Matsui [Page 642] is reported to have stated that because negotiations were dragging he might have to revert to his original attitude, as every day’s delay was a day lost in restoring war-stricken areas and financial resources furnished by Chinese customs were necessary in order to finance new Chinese regime. It is MacKillop’s belief that appearance of Matsui interview will destroy any chance of favorable consideration by Kung of Maze recommendations.
I had a conversation yesterday with Arthur Young48 who informs me that he has consistently recommended against deposit of customs funds in Japanese bank, and that he has recommended against adoption 1931 tariff as recommended by Maze. Young states that question is whether Japanese will take over customs or not, and that suggested measures will not in the end affect Japanese decision but may prejudice Chinese position vis-à-vis Japanese taking over of customs.
Repeated to Peiping and Shanghai. Shanghai please repeat to Tokyo.
- Japanese Commander in Chief in Central China.↩
- British journalist and editor of Oriental Affairs, Shanghai↩
- See Foreign Relations, 1937, vol. iv, pp. 485 ff., and Foreign Relations, Japan, 1931–1941, vol. i, pp. 517 ff.↩
- American adviser to the Chinese Ministry of Finance.↩