The Counselor of Embassy in China (Smyth) to the Secretary of State
[Received July 1—9:15 a.m.]
1074. Consensus of reports indicates cease fire order of 7 June has been well observed by both sides. (M[ilitary] A[ttaché] report period 19 June to 25 June.) Communist press has accused National Govt. concentrating forces southeast Manchuria preparatory to attack on Antung. Appears more likely that New First Army moved this area purpose protecting Anshan, Tashihchiao, Haicheng and Yingkow from attacks rather than preparatory to offensive against Antung.
Plans for air attacks by Chinese Air Force against small craft ferrying Communist forces from Shantung to Manchuria have been held up following representations from Commander US Seventh Fleet [Page 1273] that such operations would involve risk of Chinese planes to attacking US Navy vessels.
According to unconfirmed press reports, vessels of Chinese Navy on June 19 shelled harbor installations at Communist-held Chefoo arid Weihaiwei.
Shantung continues to be most troubled area. Movement of 54th and 73rd armies to Shantung to reinforce Tsingtao and Tsinan garrisons stated by National Govt. to be for defensive purposes and accordingly not contrary to terms of truce agreement now in effect. Situation Tsingtao eased considerably following arrival reinforcements. Govt-controlled press continues to report Communist attacks on points near Tsinan but, according official sources, situation there not serious.