893.00/15138
The Chargé in China (Atcheson) to the Secretary of State
[Received October 9.]
Sir: I have the honor to refer to the Department’s air mail instruction no. 351, July 27, 1943 enclosing a copy of a confidential despatch from London on the subject “Present Conditions in Chungking as seen by the British Embassy”.32 Reference is also made to this Embassy’s telegram no. 803, May 28 and the Department’s no. 758, June 1533 and to this Embassy’s despatch no. 1529, August 31, 1943.34
(By way of passing comment: The British Embassy’s memorandum enclosed with the Department’s instruction seems in general to reflect the laissez faire attitude which characterizes certain aspects of British policy toward China.)
As indicated in our despatch no. 1529, we concur, with important qualifications, in the statement in the British memorandum that the temporary maintenance of the present situation in China seems to depend greatly on crop prospects. This statement is qualified by the British Embassy with one proviso—that the weight of Japanese attacks upon the Chinese is not substantially increased. We would add [Page 114] a number of other equally or more important provisos. We would say providing also (1) that Allied victories and especially American victories in the Pacific continue; (2) that continuing and increasing air support is supplied the China theatre and becomes an increasingly effective striking force against the Japanese; (3) that endeavor to recapture Burma is not delayed too long, i. e., until for example next summer; (4) that an early campaign to recapture Burma is successfully carried through; and (5) that victory over Japan is brought much nearer in point of time before the present deterioration in China (economic, military, political and administrative) is allowed to continue for a protracted period (say, no longer than one more year).
As indicated in despatch no. 1529, the circumstance that the vast majority of the population of free China is agricultural precludes the probability, despite the fantastic inflation rate, that a general economic collapse will occur in the same time ratio as that of the collapse in Austria in the years 1921–23 after a parallel (in terms of currency expansion) seven year period of inflation.
But the economic deterioration cannot be permitted to progress along its present course indefinitely without risk of the most serious consequences.
We have reported from time to time in regard to the military deterioration which continues without sign of abatement; we have reported in regard not only to the worsening of morale of Chinese troops due to malnutrition and to inactivity but also in regard to the consequent development on some borders between free China and Japanese dominated areas of a virtual truce under which Chinese military and others engage in extensive smuggling and trade (with strategic materials and essential commodities going to the Japanese and currency and so-called luxury goods coming into free China) and pursue other gainful activities for purposes of subsistence and profit. We mentioned in our telegram no. 803, May 28 that the tendency on the part of the military as well as other Chinese to make the best of the realities of the situation was apparent in the growing trade and smuggling between unoccupied and occupied China and we suggested that if this tendency should remain unchecked there was a strong possibility of the further extension of the already extensive (if unstable) armed truce in various sections between the two areas, with the Japanese and their puppets peacefully consolidating their positions as they have in Manchuria, and with free China becoming more and more economically dependent upon the other area.
We have also reported at length in regard to the political and administrative deterioration. We have described the increasing tendencies of the Government to utilize repressive fascist practices and the breaking of morale of lower bracket officials because their positions [Page 115] no longer provide them an honest livelihood and even the desertion of minor officials to the puppets for that reason. We have reported also the expansion of purely civilian trade between occupied and unoccupied areas and the seemingly growing intercourse by civilian travelers between the two areas for commercial and sometimes for political purposes. The British Embassy mentions that there has always been some contact between the Chungking Government and the Nanking regime and that this is being maintained; we have reason to believe that it is increasing in the sense that contact between individual officials of the two regimes is increasing.
The question of what remedial measures might improve the situation does not appear to have been considered in the British Embassy memorandum. It seems to us that this question largely resolves itself into military problems. As current American victories in the Pacific (and Allied victories in Europe) tend to sustain (or retard the deterioration of) confidence and morale, acceleration of American victories in the Pacific would have increased beneficial effects upon Chinese morale, and therefore upon Chinese economy and finance. Early recapture of Burma would without question exert, by resultant restoration of confidence, a highly beneficial effect upon China’s economy and finance. On the other hand, an attempt to recapture Burma ending in failure would be in the nature of a disaster of the first magnitude (Embassy’s telegram no. 1649, September 7, 1943). Capture of Formosa or of ports and bases on the China coast from which to launch direct attack on Japan would have an effect perhaps even greater than would recapture of Burma. (The magnitude of the task of effecting such remedies is indication of the drastic nature of China’s needs.)
It is our considered opinion, in the light of the various inter-related aspects of the situation, that the most potent factors—actually the determining factors—are and will continue to be those comprised in military developments within China and in areas adjoining China.
Respectfully yours,