Sung that revenue from the sale of revenue stamps should not be forwarded to Nanking. However, the local customs authorities have not yet received a comparable order.

Repeated to Nanking and Tokyo.

JOHNSON

500.A15A5/654

The Ambassador in China (Johnson) to the Secretary of State

No. 180

PEIPING, January 15, 1936. [Received February 10.]

SIR: I have the honor to refer to the Department's confidential telegram No. 4 of January 7, 7 p.m., and to my telegraphic comments thereon contained in the Embassy's No. 11, January 9, 6 p.m., and to make the following additional comments on the suggestions therein raised.

I must confess that I was somewhat astonished at Craigie's suggestion regarding the possibility of a tripartite non-aggression pact as a political basis for a naval settlement. . . . I know of course that Great Britain is exceedingly worried about the future of British interests in the Far East, in the light of Japanese expansion onto the Asiatic Continent, but it seems to me that the British will be grasping at a straw indeed if they are now brought to the belief that a nonaggression pact will protect those interests from Japanese encroachment. It is possible that the British know something that we do not know, but I am wondering where they get their information and why they are not more open with us. Certainly such conversations as I have had with my British colleague have not revealed any beliefs on his part in regard to the probabilities of Japanese activity which I myself have not entertained.

I do not want to be considered as one who believes that the American Government should bestir itself to use force to save China from probable Japanese conquest. I do not shut my eyes to the possibility that anything may happen here. Even a Sino-Japanese alliance is within the realm of possibilities in this situation, an eventuality which I have suggested as the only alternative to a Sino-Japanese armed conflict, assuming that the present situation is to go on. But a SinoJapanese alliance would be characterized by the relations of a master to a slave, rather than by the relations which would ordinarily exist between two peoples equal parties to an alliance. I do not wish to be considered as one who clings to a belief in the permanence of the status here and who therefore is unwilling to accept new developments with all that they imply, and unprepared to entertain new understandings more in keeping with the new state of affairs. But it

seems to me it is not we who should take the initiative and abandon the past at this moment. It is not we who should anticipate the new situation. Little or no harm will come to us if we await the outcome, for the initiative lies with China. If the outcome is to be a SinoJapanese alliance, then will be time enough for us to cut our cloth to the new requirements.

It was Japan that pushed into the discard the understandings upon which the Naval Treaty of 1922 was based. What assurance have we that Japan will now be any more ready to accept a new political basis upon which to found agreements insuring the security of the interests of the United States and Great Britain? We are not yet suppliants in the conflict that has begun between the "haves" and "have nots" for a redistribution of the resources so necessary to the security of modern nations. I feel that it is absurd to believe that Sino-Japanese relations can yet be reduced to the simple formula of a non-aggression pact. Living here in the area where the policy of Japan is being persistently and consistently effectuated by the leaders of Japan's military, I do not observe any indication that the said military are abandoning that policy. On the contrary, the Japanese military, particularly the representatives of the Kwantung Army, are as active as ever, perhaps more active; for Peiping had a visit the other day from General Itagaki, who came by air after having visited Tsingtao and Tsinan. He spent four hours with General Sung Che-yuan. He also called personally upon the comparatively unknown Yin Ju-keng who heads the autonomous government at Tungchow. I do not know what they talked of; I can only surmise. But I know that General Itagaki is reputed to be the real brains of the Japanese Army in Manchuria, and he would not be here unless serious and important business of the Kwantung Army was being discussed, and I have no doubt what that business must be. His visit synchronized with a visit from Ohashi, formerly a minor secretary in the Japanese diplomatic service in Peiping but more recently a Vice Minister of Foreign Affairs in the Government of "Manchukuo". These activities on the part of Itagaki and Ohashi may possibly be the Kwantung Army's reaction to this alleged suggestion of a non-aggression pact, but they confirm my belief that the Japanese military are not going to be thwarted in the carrying out of their plans by such a pact.

It will not hurt the United States and Great Britain to await the event. I feel sure that it will be harmful for us to attempt to bury our heads in the sand of a tripartite non-aggression pact at this moment. I accept the statement that Japan does not want to become involved in a military operation here in North China at the present time, because I believe that the Japanese military want to make themselves secure against Soviet Russia before they proceed farther south. The modern airplane has made Japan's situation extremely vulnerable.

It can no longer be considered a ship, but from a military point of view must be looked upon as a missile, and therefore stopped before it is launched. Japan cannot, from a military point of view and in her present state of suspicion, feel secure within her own shores until she has placed herself in a position where she can stop hostile aircraft before they can leave the ground.

Russia, Great Britain, the United States and Holland control the greater part of the world's resources in iron, oil, coal and cotton, which are so necessary to national security in this age. Italy, Germany and Japan have none of these resources; they are dependent upon us. They are over-populated, in debt, desperate, and determined. It is not to their interest, severally or together, to make common cause with Soviet Russia, the United States, Holland and Great Britain to make secure the present control of those resources. I would as soon make an agreement with a starving family next door whereby we would mutually undertake not to seize one another's bread, as enter into an arrangement with any or all of these three countries not to aggress on one another's interests. Some other means of reaching security has to be found.

I confess my inability to know just what basis for such an agreement is open to us, but I feel that there can be no basis of agreement until we can be certain that the powers in question are willing to abandon the obviously aggressive ideas which they now entertain. And nothing but force, economic or physical, seems to be adequate to meet the kind of force which these powers naturally believe in and are ready to use. There is talk in some quarters of the advisability of a redistribution of world resources for the benefit of all, but I have yet to see any worthwhile suggestion as to how this redistribution is to be brought about without involving the more difficult problem of the exploitation of those resources.

The Philippine Islands possess in considerable quantities the resources of oil, coal, iron and gold which Japan needs. Perhaps here in the East these resources of the Philippines are the only remaining unpreempted resources of their kind. We never exploited them, because we did not need them. We were a dog in the manger while we occupied the Islands. I doubt whether the Filipino will ever exploit these resources. . . I understand that Quezon,28 with the assistance of former Governor Harrison 29 who is now his economic adviser, has some idea of developing these resources by concessions. It should be possible for American ingenuity and American capital to exploit these resources of the Philippines for the benefit of China and Japan and the Filipino, but I wonder whether the American

28 Manuel L. Quezon, President of the Philippine Commonwealth. 29 Francis Burton Harrison.

can do this with Filipino labor. I do not know. Perhaps the experience of those who have developed the Benguet gold fields with the aid of the mountain tribes holds the answer to this question. But the coal and iron and oil of the Philippines cannot always remain undeveloped; and if the Filipino or the American does not do the job, then the Japanese will and must. This problem of exploitation at the present time is one that is closely allied with the needs growing out of nationalism and national requirements, and must be considered in any suggested redistribution of world resources that may be undertaken for the purpose of bringing about world security. Respectfully yours,

NELSON TRUSLER JOHNSON

793.94/7784

The Consul General at Canton (Spiker) to the Ambassador in China

No. 92

(Johnson) 30

CANTON, January 15, 1936. SIR: I have the honor to enclose for the Embassy's information a copy of the Chinese text and this office's English translation of a secret document 31 concerning the alleged activities of the Japanese looking to the establishment of an autonomous government of "South China", with its beginnings in the Province of Fukien. A copy of the secret document was handed to me by a reliable informant upon my assurances that the document would be handled in strictest confidence and that every care would be taken to preserve its secrecy. For this reason, no mention is made in this despatch of the name of my informant who, it is to be observed, is an official occupying a position of authority and who has proved a reliable informant in the past. This office is inclined to accept his assurances that the secret report is an entirely authentic one submitted by secret Government agents in Fukien. I am informed that these agents, posing as enemies of Marshal Chiang Kai-shek and of the Nanking regime, are being accepted by the Japanese agents as malcontents who may be depended upon to join the "Anti-Japanese Associations" which will shortly transfer their opposition to the allegedly "pro-Japanese" Chiang Kai-shek and the present Nanking Government. Those back of the scheme appear to believe that by this subterfuge it will be a comparatively simple matter to arouse local opposition to Nanking's appointees in Fukien and to overthrow the existing government regime there, making room for such of the numerous malcontents

30

Copy transmitted to the Department by the Ambassador in China in his despatch No. 199, January 30; received March 9. 1 Enclosures not printed.

as may be approved by the Japanese as puppets in the proposed new "autonomous government".

The secret report is of a business-like tenor, admits that full information has not yet been procured by the secret agents and, in general, rings true as compared with the usual flamboyant reports of Chinese subordinates to their superiors in relation to the accomplishment of tasks to which the former have been set.

While the events described in press reports may be entirely disassociated from the scheme described in the secret report, this office has been interested in the possible relationship of recent newspaper reports similar to the following one which appeared in the South China Morning Post of January 7, 1936, under a Canton date line:

"Communists in southern Fukien have looted the hamlets around Yung Ting (in southwestern Fukien close to northern border of Kwangtung Province), their leader being 'General' Lee Tien-hui.

"Lee Tien-hui's men are equipped with new rifles and wear smart uniforms. The Communist officers told the villagers that they had instructions from the 'Central Authorities' to summon a big antiJapanese meeting,

"After plundering the border villages, the Reds escaped back into Fukien taking several hostages with them.

"Another Communist band is in league with pirates in northern Fukien, by whom they are supplied with smuggled arms."

In relation to such news reports, it is to be observed that smuggling activities which have long existed between Taiwan and the Fukien coast, which have involved Taiwanese in Fukien, and which, at times, have resulted in the intervention of the Japanese consular, naval and other authorities, would indicate the feasibility of landing arms and ammunitions for the use of malcontents in Fukien, as described in the secret report.

My informant states that definite information has been received to show that, while the Japanese Army is to have control over the establishment of autonomous governments in the north and the interior of China, this task, in relation to the southern coastal provinces, has been assigned to the Japanese naval authorities in cooperation with the Taiwan Government.

Information is now being gathered in relation to Japanese activities in South China in general and will be transmitted in a subsequent despatch.

A copy of this despatch is being supplied in strict confidence to the American Consulates at Foochow, Amoy and Swatow, and to the Commander of the South China Patrol of the United States Asiatic Fleet.

Respectfully yours,

C. J. SPIKER