604.9315/2
The Ambassador in Japan (Grew) to the Secretary of State
[Received May 16.]
Sir: I have the honor to report that a “North China Economic Mission” composed of some 30 North China businessmen and headed by Mr. Wang Yin-Tai, Minister of Industry of the “Provisional Government” arrived in Tokyo on March 30, 1939, for a scheduled stay in Japan of approximately one month.
[Here follows report of the mission’s activities in Japan.]
While the functions of the mission are not apparently political in nature, and while the mission has no authority to conclude agreements, its head and a number of the members of the mission are in authoritative position to speak for the “puppet” government of North China. Likewise the Japanese business leaders who attended these meetings have been sufficiently identified with the past and present development of Japan’s economic policy on the mainland to warrant treating their views as expressed at these meetings with “The North China Economic Mission” as more or less authoritative outlines of Japan’s economic objectives in North China. It appears clear from the discussions which have taken place during the mission’s stay in Japan that the Chinese who have been won over to the Japanese cause in North China are filled with misgivings with regard to the position they will occupy under Japanese-controlled North China. Through force majeure they will more than probably have to accede to Japan’s demands to revise the customs tariff downward in favor of Japan and to their own detriment—specific duties will be replaced by ad valorem rates—the gold unit system will eventually go by the [Page 164] boards to ensure a smooth functioning of the Japan–China–“Manchukuo” yen bloc. Such capital as can be obtained from Japan will be used to foster industries which will not compete with industries in Japan, thereby preventing any natural growth of Chinese industries.
It will be noted that the spokesmen for the Japanese gave no assurances that the exchange and trade controls now in effect in North China would be relaxed to permit of a return of North China’s export and import trade to normal channels. The Japanese themselves it would appear see no end in sight to the exchange problem which their adventures on the Continent have created. All these considerations would appear to point to but one conclusion—Japan is determined to make North China a subsidiary unit in its economic system—a unit which will provide a limited number of raw materials, the export of some of which will create foreign exchange, the greater part of which will be absorbed by Japan in return for which Japan will supply cheap machinery, piece goods, and similar materials for which its own industrial plant is well-geared. Foreign interests apparently will survive only to the degree that they do not interfere with the development of this program. Their fate in the end will probably parallel that of foreign firms in “Manchukuo”. As for the Chinese people themselves, the logical development of Japan’s program can only mean economic and political enslavement. This much may be said for Japan’s prospects of success in North China—North China is not a strategic area in the same sense as “Manchukuo” and therefore will not require the large outlay of capital which has been necessary for the building up of heavy industries in that “puppet” state.
Respectfully yours,