893.00/14600: Telegram
The Ambassador in China (Johnson) to the Secretary of State
Chungking, December 4, 1940—11
a.m.
[Received December 5—6:46 a.m.]
[Received December 5—6:46 a.m.]
605. The situation is improved diplomatically.
- 1.
- In the international field the Hitler–Molotov conversations, the [Page 456] Japanese recognition of Wang Ching-wei and the granting of further American credits to China1 received the greatest attention. Chinese official circles displayed concern during and immediately after the Berlin discussions but as the month passed without noticeable change in the Russian policy toward China the feeling of anxiety appeared to dissipate. It was learned that Berlin had approached the Chinese Government through the Chinese Ambassador suggesting the advisability of the Chinese Government coming to terms with Japan and even joining the Axis but that the Chungking Government had not replied to this suggestion. Japanese recognition of the Wang regime had little apparent effect on Chungking. Reports of Japanese endeavors to negotiate directly with the National Government could not be confirmed. The new American credits were gratefully received and were regarded in part as an American reply to the action of Japan in according recognition to the Nanking regime and as evidence of continuing American support of China. Chinese circles professed to believe that Japan had a hand in instigating the outbreak of hostilities between Indochina and Thailand and that further Japanese moves in the Southern Pacific were in the offing.
- 2.
- The protracted exchange of views looking to the transfer of Communist units from Central to North China was reported to have continued without noticeable result. As far as could be ascertained there were no clashes between Government and Communist forces during November. The Chinese Government denounced the action of the French authorities in handing over the Chinese courts of the French Concession at Shanghai to the Nanking regime, ordered the courts to cease functioning and announced that organs in the Concession styling themselves as Chinese courts shall be regarded as illegal and their acts as invalid.2 Chiang Kai-shek relinquished the chairmanship of the Szechuan Provincial Government to Chang Chun. Ku Cheng-lun was appointed Chairman of the Kansu Provincial Government; vice, Chu Shao-liang. The Japanese completed the withdrawal of their military forces from Kwangsi without noticeable interference on the part of the Chinese. The chief military activity was centered in Central and North Hupeh where four columns of Japanese troops operating on both sides of the Han River advanced in a northerly and westerly direction presumably with the object of releasing increasing Chinese pressure on the Wuhan3 area. Chinese reports were to the effect that the Japanese attacks had been repulsed [Page 457] with heavy losses. Japanese aerial activity in the unoccupied provinces was at a minimum.
- 3.
- The economic situation, chiefly featured by a further rise in commodity prices, continued to deteriorate. Although the National Government was studying remedial measures it was apparent that a definite plan had yet to be formulated to deal adequately with the problem. Chiang Kai-shek in an address to district magistrates made it plain that drastic steps would be taken to put an end to hoarding and speculation in rice. Meanwhile official distribution of low-priced rice was being made to the poor of Chungking. The construction of railways and highways continued throughout the unoccupied provinces and there was a general effort to improve communications. The building trade was active, especially in the vicinity of Chungking. Chinese currency remained stable in terms of American dollars. At a committee meeting held at Chengtu early in November the decision was made to establish the Szechuan–Sikang Development Corporation whose function it will be to develop the industrial and mineral resources of the two provinces.
Sent to Department. Repeated to Peiping.
Johnson