893.24/1544

Memorandum by the Chief of the Division of Far Eastern Affairs (Hamilton)

There has recently been a noticeable increase in the number of suggestions from Chinese sources that China might in the not too distant future, lacking greater military aid from the United States, cease to be an active belligerent.

Some of these suggestions have emphasized China’s fear of Russia; others, suspicion of the ultimate intentions of the United States and Great Britain with respect to the Far East. Some have included the “possibility” that China might make some kind of “peace” with Japan.

These suggestions may reflect (a) a serious growth of depression and “defeatism” on the part of some Chinese spokesmen and some Chinese leaders; and possibly, (b) intensification of a campaign [Page 5] (perhaps having connection with the visit to this country of Madame Chiang Kai-shek) to bring strong pressure upon the President and his chief political and military advisers to effect immediate and greatly increased military aid to China. That is, Chinese leaders may already have fallen farther than has been realized into a mood of depression and/or have conceived a campaign of pressure upon us as a means of alleviating the psychological, the economic and the military situation in China.

I

The situation of China is without doubt critical in many ways. Notwithstanding the extraordinary amount of financial assistance which we have rendered to China, the country’s finances are admittedly in a precarious position which is steadily getting worse. Practically no consumer goods are entering China. The inflationary process is also aggravated by deficient internal transportation and by hoarding of and speculation in foodstuffs and other commodities. Wholesale and retail price indices have risen in Chungking approximately 7,000 percent of those prevailing in 1937 and the Chinese dollar has depreciated to a value on the black market of one cent or less United States currency. The situation has seemingly reached point where the provision of financial aid to China offers no solution. Restoration of China’s land routes to the outside world to an extent sufficient to enable the importation into China of substantially increased quantities of consumer goods in addition to military supplies would seem to be essential if the present inflationary tendency is to be counteracted. Reopening an important land route to the outside world would not only furnish some purely economic alleviation of China’s economic ills but would also increase public confidence in Chinese Government currency and in China’s economy in general and thus exert a very healthy and beneficial influence.

II

While the most active phases of the Sino-Japanese hostilities ended some two and one-half years ago, the Chinese since that time (a) have in general held their lines against the Japanese forces in China while the latter have been intent upon consolidating their position rather than advancing farther westward, and (b) have simultaneously contained some 600,000 out of approximately 2,250,000 troops. (China has, of course, contributed to the war effort in a number of other ways: for example, China’s continuation in the war against Japan has held open to the United States the possibility of utilizing air bases in east China for a direct attack upon Japan and the fact that China has not [Page 6] been conquered has contributed to a continuing loss of Japanese prestige and Japanese morale and a continuing drain upon Japan’s military strength.) Nevertheless, while the Chinese have some two million and a half troops in the field, only a comparatively small portion of these troops is adequately armed, not a single division is understood to have sufficient light and heavy artillery, and air support has been practically nonexistent except for the American Volunteer Group which operated largely in Burma and the more recent operations in China of United States air units. In these circumstances it cannot be assumed that, if China is not given general military assistance on a considerable scale, it will be possible for the Chinese armies to continue indefinitely to contain the Japanese forces, especially if the latter should undertake concerted effort to advance. Furthermore, as no one can say how long the war will last, it would obviously be a grave mistake not to make effort, by way of assisting the Chinese, to keep open the possibility of using China’s potentialities, including potential air bases in Chekiang and other coastal areas, for the future large-scale offensive against Japan.

III

There are a number of unfortunate aspects in the political situation in China. Maneuverings by various cliques and factions in the Government are, it is believed, unimportant from the point of view of Chiang Kai-shek’s position (in as much as none of them appears to be directed against Chiang) and from the point of view of bringing about an increased likelihood of China’s withdrawing from the war. But if Chiang should be eliminated by serious illness or death there is a strong possibility that the Chinese Government would fall apart.

There is the continuing dissension between the Kuomintang (including Chiang Kai-shek) and the Chinese Communists. It is not believed there is probability at present or in the near future of an outbreak of open civil war as a result of this dissension; latest information is to the effect that Chiang is sensible of the dangers in the situation and will refrain from taking such repressive measures as might lead to open civil war. Meantime, the Communist armies are practically immobilized from action against the Japanese, and considerable bodies of Central Government troops stationed at various places as checks against the Communists are similarly immobilized. As for the future, unforeseen circumstances may cause the Government’s attitude of restraint to change.

A new development in the political situation was the Nanking regime’s recent declaration of war upon the United States and Great Britain. It is too early to attempt to predict what the full results [Page 7] of this action will be. Japanese radio announcements that the Nanking regime would now recruit large numbers of Chinese troops suggest that the Japanese may plan the development of active civil war in China or the replacement of a certain number of Japanese garrison troops by Chinese troops. While the Japanese have utilized puppet troops to some extent, this has not yet become an important factor but if it continues on an expanding scale it will, of course, tend to weaken China’s situation and may eventually have serious results.

Since the outbreak of the Sino-Japanese hostilities and before, there has been in Chinese Government and other influential circles a number of individuals, not organized in a group, who, for a variety of reasons, might under some circumstances not be averse to some “peace” arrangement with Japan. For instance, some banking groups and prominent businessmen whose interests have been centered in financial and commercial marts such as Shanghai, are naturally war-weary and may have leanings toward “peace”. If Chiang should be eliminated, or if China’s economic situation should become so desperate as to cause a currency collapse, such uncrystallized elements could be expected to exert influence in regard to any question of continuing or discontinuing the war.

IV

Chinese morale is adversely affected not only by the lack of military aid furnished China but by diversions of aid allocated and failure on our part to fulfil promises of aid. Chinese resentment toward the British (which is severe) tends to turn, at least indirectly, toward the United States because the United States and Great Britain are so closely allied in the formulation of global strategy.

Chinese disappointment and resentment have been reflected in a number of ways. One new development, which should not be overlooked, is the apparent growth in northwest China of an obvious anti-foreignism. While this may not be directly related to the feeling of the Chinese that they have not been fairly dealt with by their allies, it is probably a result of a nationalistic spirit which has relation to China’s position as a victim of aggression and an important member of the United Nations that has not—in Chinese eyes—been given appropriate concrete recognition by China’s allies.

There has been much publicity to the effect that China is one of the “Big Four” of the United Nations. Some Chinese believe that China is not actually so considered or treated and as a result thereof are disappointed and resentful. They do not give weight to the facts that, with the exception of Great Britain and Canada, China has substantially the same representation in agencies of the United Nations as has any other country; that China while legally at war with Germany [Page 8] is not in position to engage therein; and that China from point of view of production of war materials must be largely a recipient from rather than a contributor to other countries. The Chinese who are thus disappointed realize that China is represented in or has liaison with only three existing international commissions, committees, boards, et cetera in Washington concerned with the war: liaison (believed to be limited) with the Combined Chiefs of Staff; membership in the Pacific War Council; and membership in the United Nations Information Board. They realize that out of the vast quantity of Lend-Lease supplies furnished other countries China’s share is less than two percent. These same Chinese are also aware that, despite their high hopes, China’s position after the entry of the United States and Great Britain in the war in the Far East has up to the present time substantially deteriorated rather than been bettered.

While some Chinese leaders appear to give willing lip service to the theory that Germany must be crushed before Japan, they are acutely conscious that aid flowing to China is on a proportionate basis very small.

V

Chinese suspicion of the ultimate intentions of the United States with respect to the war in the Far East appear to be based upon various considerations: (a) The emphasis placed by the United States and Great Britain on crushing Germany before Japan; (b) the lack of material aid to China to enable Chinese troops to fight the Japanese more effectively; (c) the tendency of our war effort in the Pacific to comprise a “holding” war and a war of attrition upon Japanese naval and air forces rather than the recapture of Burma with a view to progressively driving the Japanese in China to the seacoast and attacking Japan proper from China; (d) the fact that official statements made by the United States regarding post-war aims and policies in the Pacific area have not been made more explicit; (e) a latent fear that the United States may eventually grow tired of the distant war in the Pacific and eventually be willing to enter into a negotiated peace with Japan. (Incidentally, some observers think that the Japanese cling to a belief along these latter lines.)

Chinese suspicion of Russia is believed to be based, in part, upon fear, some of which has foundation in Russia’s past acts and present attitude toward Japan, and consequent speculation. Russia’s continuing caution in respect to her relations with Japan causes apprehension that Russia, if the latter should see advantage in so doing, might make a deal with Japan at China’s expense. On the other hand, some Chinese are apprehensive that in due course Russia and Japan will become involved in war and Russia will demand, when Japan is defeated, [Page 9] paramount influence in or control—direct or indirect—over Manchuria and Korea.

VI

In summary, the economic and psychological situation in China is already critical and is deteriorating. The internal political situation holds possibilities of future danger to China’s unity and to indefinite continuation in the war effort. The military situation, while unsatisfactory from the point of view of offensive action against the Japanese, continues to be advantageous to the United Nations in that Chinese troops are in general holding their lines and are thus effectively containing large Japanese forces, and in addition, there is being held open for the future the possibility of offensive action on and from Chinese territory by China and the other United Nations against Japan. On the other hand, the Chinese are becoming increasingly disappointed and resentful of the lack of military aid; some Chinese spokesmen are beginning to talk of the possibility that China may not long continue to be an active belligerent; and there is question whether the Chinese will, without substantial military aid, indefinitely continue active resistance to Japan.

The primary need in reference to the China situation is that China be given more military aid, either by augmenting the American air force and other American forces there or by furnishing increased material for use of Chinese armies, or both. In addition, it is believed we should do everything possible in the psychological and political fields to engender in the Chinese a feeling that they are full partners with us and the other United Nations—to the end that China will move along with the rest of the United Nations in maintaining and increasing the common war efforts against the Japanese.

M[axwell] M. H[amilton]