740.0011 Pacific War/2066: Telegram
The Ambassador in China ( Gauss ) to the Secretary of State
[Received 7:25 p.m.]
194. Summary of significant events in China since the outbreak of the Pacific War.
On December 8, the Generalissimo proposed to America, Britain and Russia a joint front against Japan and an Allied Supreme Command centering at Chungking. On December 9 China declared war on Japan and also declared that a state of war existed with Germany and Italy. The Chinese press, echoing the official feeling, urged Russian entrance into conflict with Japan. At the end of December [Page 26] Generals Wavell and Brett57 held conferences with Chiang in Chungking. Subsequently Chiang accepted the post of Supreme Commander for Allied forces operating in China and border regions of Indochina and Thailand. Chinese troops, numbering about 50,000, have been sent to participate in the defense of Burma. Early in February General Chiang, his wife and staff members visited India via Burma, returning to Chungking March 5.58
Aside from the successful repulse of the Japanese attack on Changsha at the beginning of January, there has been no military activity in China of note since war began. Chinese forces were unable to organize an offensive in time to relieve Hong Kong. Chinese military operations, much overplayed in the press, have been confined to minor clashes and to occupation of areas evacuated by the Japanese.
The authorities conservatively estimated that Japanese troops in China proper have been reduced from 37 to 28 divisions. There has been little evidence as yet that the Chinese are taking advantage of this weakening of the Japanese position. The American volunteer aviation group under Colonel Chennault59 has made a remarkably fine record and impression.
Kuomintang-Communist relations have been quiescent during the period under review.60 Changes in government personnel have strengthened conservative party control.
In the economic finance field, interest has centered around the large American and British credits, granted to China in February and the manner in which they will be employed. Currency inflation, with resultant price rises, hoarding, and speculation continue to be a major concern. A “commodities administration” has been established with a view to stabilizing prices and attacking the hoarding situation. A new land administration has been set up ostensibly as a preparation for dealing with land problem. Past experience does not make for optimism with regard to the success of these organizations, but there is some reason for hope that in present circumstances they may attack the problems more resolutely. There are indications that the American credit might be effectively employed as an aid toward solving these problems and to stimulating production of consumption goods as well as to attack the currency inflation situation.