793.94/15519
The Ambassador in China (Johnson) to the Secretary of State
[Received December 2.]
Sir: I have the honor to refer to a telegram dated November 2, 1939, from the American Consul General at Shanghai8 expressing the general view that the Japanese are succeeding in building a solid economic foundation to support their military and political invasion of China.
The Embassy had observed what appeared to be considerable quantities of Japanese cloth in Chungking shops and on November 9 confidentially discussed with a prominent official of the Chinese Government the question of trade interchange between “occupied” and “unoccupied” areas.
The informant said that members of the Government had earnestly canvassed the question whether the importation of Japanese goods needed by the population, which needs the new industrial set-up in [Page 315] west China cannot yet supply, was of greater advantage to the Japanese or to the Chinese. A similar question arose in regard to exports; for example, many farmers in north China had become accustomed to raise cotton for sale and had become habituated to a money farm economy. It was difficult for the Government to persuade such farmers to return to subsistence farming, since there were many needed articles which their farms could not produce.
The informant clearly recognized the existence of arguments both pro and con trade interchange between “free” and “occupied” areas, with respect to its effect on the outcome of the hostilities, but avoided any expression of personal opinion. He implied that the policy of the Government was to keep alive the theoretical strict embargo on such trade, but in practice to wink at it when the welfare of the Chinese population in unoccupied areas was deeply involved.
Assuming, as the telegram in reference assumes, that the creation of a self-sustaining economic structure in Japanese-controlled areas in China will assist the Japanese invasion, I am inclined to think that this gradual economic entrenchment by the Japanese in the regions occupied by them will be more difficult for the Chinese to combat than the extension of military control
It is understood, however, that some persons insist that the racial and sentimental urge of the Chinese population to resist Japanese domination will prove stronger than the impulse to accept economic benefits at their hands, at the cost of submission. This is merely another phase of a conflict whose outcome cannot be predicted with any confidence. Looking at the matter from the standpoint of American interests it may, however, be safely asserted that markets and sources of supply of Chinese raw materials and products thus gained by the Japanese they will attempt to control strictly to their own exclusive advantage.
Respectfully yours,