The Ambassador in France ( Bullitt ) to the Secretary of State

No. 4092

Sir: I have the honor to reply to the Department’s instruction no. 1351 of March 6, 1939, enclosing a paraphrase of telegram no. 64 of February 24, 9 a.m., from the American Consul General at Hong Kong,52 concerning certain developments in French Indo-China, reported to him by the American Consul at Saigon on February 14. The Embassy has also received a copy of a letter of February 28, 1939, from Consul Flood at Saigon to the Consul General at Hong Kong,53 containing the text of a message regarding the same developments which he requested be radioed to the Department. These reports of February 14 and of February 28 from the Consul at Saigon, dealing primarily with the question of supply to China through French Indo-China from abroad, convey the impression that French policy has hindered rather than helped the Chinese to supply their wants, vital to the conduct of the war, from French and other foreign sources.

As observed from Paris, it has appeared that, although French sympathies have been almost entirely on China’s side, the French Government has from the beginning of the war been chary of giving the [Page 747] Chinese Government support and assistance. To what extent this policy of caution has been dictated by fear of Japanese retaliation against French trade and other interests in the Far East, or of aggression on France’s possessions there, it is difficult to estimate. Certainly the Japanese have not missed many opportunities to stimulate the belief that any important form of assistance, such as the supply of arms, would provoke serious reprisals. Moreover, the French Government has been unwilling to permit arms exportation, as they are needed for this country’s defense.

French financial aid to China has been insignificant. The Chinese have been unable to obtain a loan from the French Government, and have not attempted to float one in the money market. While one or more French banks have participated in the financing of the Dong Dang-Nanning railroad, the amount of credit secured for purchases here has been inconsiderable.

Thus the question of help given, or harm done by France to warring China reduces itself principally to the question of facilities for, or hindrances on the shipment of goods to China through French Indo-China.

This traffic was regulated by a decree of August 1937 of the Blum Government, which prohibited the shipment through Indo-China of munitions of war, and a number of other articles susceptible to military use, like airplanes, not ordered prior to the issuance of the decree. As long as Monsieur Delbos, or his successor, Monsieur Paul-Boncour, was Foreign Minister the decree was applied in a manner favorable to the Chinese, but under the Daladier Government with Monsieur Bonnet as Foreign Minister, the control became very rigid, and remained so.

A few months ago we were told by a colleague in the Far Eastern Division of the Ministry of Foreign Affairs that the 1937 decree was being strictly enforced, and that as orders placed prior to August 1937 had been almost completed, very little in the way of munitions was passing through Indo-China. His statement was confirmed by the Assistant Military Attaché of the Chinese Embassy.

On February 6 of this year a counselor of the Chinese Embassy informed us that the French were still making difficulties for his Government in procurement of war supplies. He said that as the result of a dispute between the Governor of Yunnan and French merchants in Indo-China over whether the official or market rate of exchange was to be used in transfers of funds from Chinese dollars to Indo-Chinese piastres, the French succeeded in getting the Governor General of Indo-China, who ordinarily favors Chinese interests, to impose in retaliation a 3 percent ad valorem transit tax on goods passing through Indo-China en route to China. In consequence, considerable merchandise has been held up in Indo-China, and the bulk of importation [Page 748] has been shifted to the Rangoon–Mandalay–Yunnanfu route. This shift has been encouraged by the removal of a number of discriminations on importations into Burma against non-British ships and goods, so that now ships and goods of all nationalities destined for China enter Rangoon on a basis of equality with British.

He went on to say that protest against the French 3 percent transit tax has been lodged in Paris, but the Minister of Colonies professes himself powerless to overrule the decision of the Governor General.

At that time General Yang Che, Chinese Ambassador to the Soviet Union, had been living in Paris in strictest seclusion for the past three months for the purpose of buying armaments. The French, we were told, would sell him nothing, but he had purchased rifles and field pieces, mostly of obsolete pattern, from Belgium, Switzerland, Lithuania, Germany, and Czechoslovakia. These arms were shipped from northern European ports as the French Government would not permit their shipment through Marseille, which would have been cheaper and more expeditious.

But the Japanese occupation of Hainan54 instead of intimidating the French into shutting down further on the Chinese supply line through the Indo-Chinese Protectorate was followed by a change of policy to China’s benefit. In consequence General Yang was soon able to inform Ambassador Bullitt personally that he was entirely satisfied with the treatment his Government was receiving from the French.

On March 6 the Chinese Ambassador to France informed Ambassador Bullitt that the French Government would henceforth regulate transit shipments through Indo-China in accordance with Chapter One of the Geneva Convention of 1925 on control of international trade in arms and munitions55 rather than the 1937 decree. (Embassy’s telegram no. 415 of March 6, 8 p.m.56) That this has in effect been done has been lately told us by a secretary of the Chinese Embassy. He stated that the change now permits transit shipments of anything susceptible to peace time use, such as motor trucks, civil airplanes, raw materials, and machinery, even that used in munitions factories.

The same informant stated also that while the French professed inability to place an embargo on the export of war materials from Indo-China to Japan, as urged by the Chinese Ambassador here, they had agreed to subject their exportation to prolonged delay. The Chinese Secretary said that the “war materials” involved were principally iron and copper ores and coal, and that eighty to ninety percent of the export of these commodities from Indo-China went to Japan. He personally was convinced that the delay which would be [Page 749] imposed on their shipment would be almost as troublesome to Japan as an embargo.

The two reports of Consul Flood, referred to in the first paragraph of the present despatch, were written prior to the taking of Hainan, The information they conveyed is more in harmony with French policy as noted by this Embassy in the pre-Hainan period. As that policy has changed, Mr. Flood doubtless has now quite different facts to report.

With respect to the progress of work on the Dong Dang–Nanning railroad, I have been informed by a British friend who has just returned from those parts that work is going ahead steadily. According to their contract, the French, he said, are covering the cost of materials, freight thereon, and bridge construction; the Chinese are providing the labor and paying the cost of other (than bridge) construction.

Officials in the Far Eastern Division of the Ministry of Foreign Affairs confirm the above statement that building of the railroad has not been stopped. In reply to the specific inquiry as to whether work on the bridges had been interrupted, they stated that while they could not positively affirm that it had not, the Foreign Office had no information of an interruption or a withdrawal of the European construction staff. They thought that the line would be completed and in operation sometime this year.

Respectfully yours,

For the Ambassador:
Edwin C. Wilson

Counselor of Embassy
  1. Neither printed.
  2. See telegram No. 77, March 3, 10 a.m., from the Consul General at Hong Kong, p. 145.
  3. See pp. 103 ff.
  4. Signed June 17, 1925, Foreign Relations, 1925, vol. i, p. 61.
  5. Not printed.