893.102S/2554: Telegram
The Consul at Shanghai (Stanton) to the Secretary of State
[Received November 10—7 p.m.]
1652. Department’s 915, November 1, 6 p.m. In view of Mr. Lockhart’s illness it is not possible to obtain his views at the present time. However, the following comments are submitted regarding the situation at Shanghai.
1. Recent political developments in the Pacific area have left a distinct impression upon Shanghai. The local economic situation has been profoundly influenced by the export restrictions and freezing measures enjoyed [employed?] by the United States, Great Britain and the Netherlands Indies, by the operators of the Stabilization [Page 871] Board and the countermeasures taken by the Japanese authorities in the Shanghai area.
2. These developments have both directly and indirectly contributed to the establishment locally of a black market, the spectacular decline in value of Chinese national currency on that market, the phenomenal increase in the prices of all commodities, which have been influenced by black market operations, the activities of hoarders and speculators and a noticeable decline in industrial activity. The economic situation is so serious that rice riots or other disturbances may occur at any time and it is conceivable that such disturbances may be utilized by the Japanese as an excuse to take control of the International Settlement and French Concession.
3. Another factor in the local situation which deserves consideration is the steady political and economic pressure maintained by the Japanese upon the Shanghai area. Constant political pressure has been exerted upon the International Settlement with a view to gaining greater control over the Shanghai Municipal Police. Pressure has also been brought to bear upon the Inspector-General of Customs to agree to the appointment of a Japanese national as Commissioner of Customs at Shanghai. Within the past 2 months the Japanese have also instituted a number of important measures which have placed the economic life of the port more fully under their control.
Through the issuance of orders to the Shanghai Customs by the Chinese Superintendent of Customs (a Nanking appointee), the Japanese authorities have prohibited the export of Shanghai’s principal export commodities.
Furthermore, the Japanese Military and Naval authorities have jointly promulgated stringent regulations, which have not yet been fully enforced, governing the movement of all commodities in the Shanghai area and the foreign trade of the port. An officer of the Japanese Consul General stated recently that these regulations might be fully enforced at any time and that there was considerable sentiment in both official and civilian Japanese circles here favoring such action immediately or the forceful seizure of the International Settlement and the French Concession. He intimated, however, that Japanese policy at Shanghai at present was one of watchful waiting and that much depended on whether American and British economic measures were intensified or relaxed. It is believed that this policy is based not only upon possible political and economic developments in the Pacific area, but also upon the purely practical consideration of the actual value of Shanghai to the Japanese at the present time.
4. In view of the fact that Japan is in complete military and naval control of the Shanghai area it is believed that encroachments from other sources are out of the question. The Nanking régime remains [Page 872] completely under Japanese control and its attempts to extend its authority in connection with such matters as the Chinese courts (this question is not being pressed at the moment), the extra-Settlement roads and the collection of taxes from foreigners and Chinese within the Settlement and French Concession are dependent upon Japanese acquiescence. This is also true with respect to the Germans, of whom there has been a considerable influx in recent months. The activities of Nazi agents have greatly increased but appear to be largely confined to propaganda. It is possible, however, that with the arrival of Stahmer, newly appointed German Ambassador to Nanking, the Germans may become increasingly active in Shanghai.
5. Finally, although there have been no major military or political developments in the Shanghai area during the past month, tension and unrest in Shanghai have greatly increased because of the strained relations existing between the United States and Japan, the chaotic economic conditions prevailing in the city and steady Japanese pressure, both political and economic, upon Shanghai. Any of these factors may precipitate the seizure of Shanghai by the Japanese but it is believed that at the moment the greatest danger to the International Settlement lies in possible riots and disturbances and Japanese reaction thereto.