793.94119/516: Telegram

The Counselor of Embassy in China ( Lockhart ) to the Secretary of State

167. 1. From a foreigner who has close associations with members of the Provisional Government and some contact with Japanese officials, it is learned that responsible Chinese of the regime here, some of whom are said to be on good terms with Chiang Kai Shek, are being more firmly pressed by the Japanese than at any time previously to find some formula acceptable to Chungking as a basis for the conclusion of peace. It is being intimated by the Japanese according to my informant that they would be prepared to go even to the extent of withdrawing from all occupied territory in Central and South China on the sole condition of a definite plan for economic cooperation in North China, together with the retention of garrison troops in this area to protect Japanese citizens and investments. There is even talk that these conditions might well envisage the restoration of a Chiang Kai Shek government in North China with the Kuomintang again in authority. Whether these overtures if they can be so described come with any sanction from Tokyo is not known by my informant but they reflect a thought in certain circles. Among younger members of the group affiliated with the Peiping regime, however, there are many who dissent from the view that peace is [Page 156] desirable at this time, their view being that the longer the hostilities continue the better are the chances for a Chinese victory, or at least a settlement far more favorable than any which could be obtained at present. This group is deriving a great deal of satisfaction and encouragement from the American and British loans which they feel reflect the optimism of those two Governments on the ultimate outcome.

2. Certain well-known Chinese identified with the regime here having long since become aware of the futility of hoping to work independently of the Japanese in administering the affairs of the Provisional Government are in a discouraged frame of mind and apparently would welcome a concrete peace move from either side or preferably a bold stroke by a disinterested neutral. If the present unsatisfactory state of affairs from their point of view continues, some of them notably Wang Keh Min threaten to resign. Wang has made such threats before.

3. The drift of thought in regard to the foregoing is difficult to follow but there appears to be a rather well defined opinion among foreigners at least that the peace terms which Japan would be willing to accept would be far less onerous now than would have been the case a year ago. Nevertheless the circle which is directly concerned with running up peace weather vanes in North China is very small and generally uncommunicative which means that such information as is obtained from time to time usually comes second or third hand and often must be discounted.

Sent to Chungking, code text to Tokyo.