793.94/15444: Telegram
The Counselor of Embassy in China (Lockhart) to the Secretary of State
[Received 8:20 p.m.]
562. Department’s 203, October 21, 2 p.m., to Chungking.95
1. If day to day developments in North China the past year made clear any one fact it is that the Japanese are applying to this region exactly the same methods and tactics they employed in Manchuria. Military, political, financial, economic and cultural policies are now so completely interwoven into one pattern that one is forced to the conclusion that the Japanese believe that they are here to stay at least in larger cities and along the railways in the areas actually occupied. The Japanese population at Peiping according to a late census is now in round numbers 37,000, Tientsin 44,000, Kalgan 7,000, Tsingtao 22,000, Tatung 4,000, Shihchiachwang 7,000, and Tsinan 11,000. These figures represent tremendous increases over a year ago. There has also been a pronounced influx into the smaller towns.
The big development companies are here and are getting into everything that gives the slightest promise of returning a profit and the Japanese Government is seeing to it that the way is paved. If ever a policy of industrial development and economic cooperation between China and Japan is put into operation in North China by mutual [Page 304] consent, the Japanese are certain to be the dominant factor because they are from long experience industrialists and economic exploiters and the promoters of the larger enterprises know that they can count on their Government to support them.
2. The Federal Reserve Bank is losing no ground if indeed it is not slowly gaining in areas actually under Japanese occupation. Foreign exchange transactions in Federal Reserve Bank notes can easily be effected at the open market rate but the great drawback to the conduct of foreign trade with this currency is that such transactions are hampered by the import and export restrictions which make it difficult to carry on such trade except at the government fixed rate which was and that is, also an obstacle faced by businessmen in Shanghai in using Chinese national currency. I believe the currency problem in North China will solve itself in due course but the process will be slow. The average Chinese of the street is not greatly concerned whether the new currency is supported with adequate reserves or not, or whether it can be used in foreign trade transactions. It is difficult to determine as between the businessman and the missionary who will be the greater loser as the result of the Japanese occupation of North China. If “Manchukuo” can be taken as an example, they will both lose heavily, but at least the missionary is still in Manchukuo albeit his work is curtailed and hampered, but the businessman has all but disappeared from that region for the same reasons that the great majority of them are almost certain to disappear from North China within a decade if the present policies are continued. The terms “Asia for the Asiatics” and “The New Order in East Asia” will have a much clearer meaning a few years hence. The foreign businessman in the occupied areas is being harassed as he has never been before and many missionaries in the interior are encountering serious obstacles as regards their work. Signs are cropping out that there is cause for real anxiety for the future of missionary work. Missionaries are discouraged and the businessman likewise sees nothing ahead but trouble and hardship.
4. [sic] The Japanese have put out many peace “feelers” during the past year, but the present peace movement which they and their Chinese adherents are sponsoring reflects a much greater urge on their part than is evident to bring hostilities to an end.
There is reason to believe that they fear that the war will drift into an endurance contest, if, indeed it has not already done so, and that in such a contest the Chinese have some formidable assets on their side. To fortify themselves against such a contingency it is obvious that the Japanese are now conducting military operations on a far less grandiose scale than formerly. The profligate expenditure of money has ceased. Men and materials are being conserved. Risks are being [Page 305] reduced. There is a distinct drift away from military exploits and towards political and economic development. Another attempt to capture Changsha and a renewal of the effort to occupy Shansi will probably be made and if these succeed it may well be that they will be the last big military operations of the war. From then on the major effort will be in the direction of: (1) establishing a new Central Government-at Nanking; (2) further attempts at concluding peace; (3) endeavors to regain lost good-will in other parts of the world, especially in the United States; (4) further strengthening of the economic and financial hold on China and, by no means least, (5) to pacify Wang Keh Min and Provisional Government at Peiping and bring them into the fold of the new Nanking Government, which effort will fail unless a change takes place in the attitude of Wang Keh Min and others identified with the Provisional Government.
Repeated to Chungking, Shanghai. Code text air-mail to Tokyo.
- Not printed.↩