740.0011 Pacific War/2667: Telegram
The Ambassador in China (Gauss) to the Secretary of State
[Received 11:58 p.m.]
867. In the Chekiang area Japanese troops evacuated Wenchow soon after occupying it on July 11 and Chinese troops reoccupied the city on July 17 but the next day Japanese troops from naval vessels retook the port and held it. Chinese claim that they are still holding Juian, south of Wenchow, which they retook on July 17.
In Kiangsi the Japanese have withdrawn from a number of points indicating that they do not intend to hold the Chekiang-Kiangsi railway. The Chinese have reoccupied Hengfeng and Tyang on the railway and they expect the Japanese to give up Shangjao and possibly Chuchow, pointing out that the Japanese are engaged in systematic plundering of towns and extortion of money, apparently preliminary to withdrawal. The Chinese state however that even should they be able to reoccupy the strategic airfields in Chekiang and Kiangsi it would not be difficult for the Japanese to prevent their reconstruction.
There have been small scale and seemingly insignificant clashes between Chinese and Japanese troops in Southern Honan near Sinyang, in Southern Shansi and in Suiyuan south of Paotou. The Chinese claim successes in these operations.
An American naval observer recently returned from Chekiang states that the Chinese commander at Lishui had well equipped troops and was anxious to fight but that under orders from Chungking he was obliged for political reasons to withdraw without fighting. The Embassy had received no report of unconfirmed reports that the Chinese commanders in the Chekiang area were advised from Chungking not to make a determined stand against the Japanese.
There have been no recent political or economic developments of note. Lowering of the United States dollar-Chinese fapi rate to five cents has had no appreciable effect on the financial situation. Sale of United States dollar certificates and bonds continues insignificant.
Embassy is inclined to question statement in message to Treasury (Embassy’s 841, July 15)74 that improvements in terms and methods of issue would have made no appreciable difference. Embassy continues to believe that trust fund arraignment and trustworthy assurance of free use of dollar credit upon redemption, even at this late date, would have encouraging effects upon sales.
The government spokesman, announcing Currie’s arrival, stated that his second visit “will undoubtedly be even more fruitful than his first visit”. Asked whether more planes were needed in addition to those of the present United States Army Air Force, he replied “Of [Page 119] course—more.” Questioned regarding other material needed, he said, “The list is very long.”
In general, the Embassy does not perceive anything in the present situation to cause it to alter its view that the Chinese will, in their own fashion, maintain the policy of resistance and continue to weather the storm.