Hopei-Chahar Political Council that the reported agreement has actually been signed. He said that the Huitung Company, which is being established as the competent organization, is in the nature of a private enterprise, with the chairman of the board of directors to be appointed by the afore-mentioned Political Council. The capital of the enterprise, 2,500,000 yuan dollars, will be 50% Chinese and 50% Japanese; however, the value of the land furnished by the Chinese side for landing fields and other installations will be computed as part of the Chinese capital and likewise the value of the airplanes, which are to be Japanese and will be figured in the total of the Japanese capital. (This arrangement would probably relieve the Chinese side of the necessity of paying more than a moderate sum.) The technical personnel, including pilots according to my informant are to be Japanese. The vice chairman of the company it is anticipated will be Kodama, vice president of the "Manchuria Air Transport Company". According to the terms of the agreement the route will be Peiping, Tientsin, Dairen, Mukden, Hsinking, and my informant stated that the present agreement did not envisage the extension of the service to other points in North China. The service, he stated, will probably begin the first part of next year. The agreement as signed is general in nature, and the particular procedure remains to be worked out. According to a report appearing in today's press the Chairman of the Economic Commission of the Political Council has denied that any agreement has been signed, but admits that the Huitung Company is to be organized "to deal with through air traffic". He stated that the organization would accord to Chinese company law and would be on the lines of the China National Aviation Corporation. According to the original press report, the agreement was signed by Sung Che Yuan and Horiuchi, Japanese Consul General at Tientsin, on October 17 in Peiping. A Japanese official connected with the military confidentially informed a member of the Embassy that agreement in actuality gives legal sanction to flights that are now being made. It will permit of the establishment of additional landing fields, and is intended to lead to the extension of the projected airline into other parts of North China, more particularly to such important points as Taiyuan, Shansi; Kalgan, Chahar; and Paotow, Suiyuan. News despatches from Nanking would seem to indicate that the National Government has no official knowledge of the matter, and that it is planned to repudiate the agreement if signed. It has been alleged, however, without confirmation, that in actual fact the permission of the National Government was obtained by the Political Council in advance. It is to be noted that Ke Ting Yuan, Secretary General of the Council, participated in the recent discussions at Hangchow, evidently in the capacity of delegate of Sung Che Yuan. Repeated to Nanking. To Tokyo by mail. JOHNSON 793.94/8290: Telegram The Counselor of Embassy in China (Peck) to the Secretary of State NANKING, October 23, 1936-10 a. m. [Received October 23-7: 14 a. m.] 312. Source believed reliable states that Chiang Kai Shek proceeded from Nanking to Sian, Shensi, by airplanes yesterday accompanied by about 20 officers. Press announces purpose as inspection of the bandit suppression activities but there is a rumor that the Communist leaders Chu Teh and Mao Tse Tung have again offered to submit to the National Government in order to fight the Japanese and that Chiang intends to negotiate terms leading to inclusion of the Communist forces in the Chinese Army. I will endeavor to ascertain possible basis of this rumor. Sent to Peiping. PECK 793.94/8294: Telegram The Ambassador in China (Johnson) to the Secretary of State PEIPING, October 23, 1936-4 p. m. [Received October 24-8 a. m.42] 514. The following telegram has been received from Shanghai: "October 23, 11 a. m. I am informed confidentially that the Japanese Counselor of Embassy who serves concurrently as Consul General at Shanghai states that the Sino-Japanese negotiations at Nanking have almost reached a deadlock. He is also quoted to the effect that the Japanese authorities are annoyed that while these negotiations have been proceeding Chiang Kai Shek has been making military dispositions which are not consonant with a desire for a peaceful settlement of the outstanding issues. Abend has informed Consulate General [at] Shanghai that T. V. Soong recently expressed the view that as China and Japan had gone to such lengths in the present negotiations in making demands and counter demands, it would be extremely difficult for either side to retreat from its present position without irreparable loss of prestige and face.["] "Telegram in two sections. JOHNSON 793.94/8292: Telegram The Ambassador in China (Johnson) to the Secretary of State PEIPING, October 23, 1936-5 p. m. [Received October 23-7:28 a. m.] 511. Following from Nanking: "October 21, noon. While the tension has eased considerably during the past 24 hours, I feel, after discussing protection plans with Captain Maynard of the USS Guam, our present station ship, that it would be highly desirable at this time to transfer temporarily from the station ship to the Embassy a small quantity of arms, uniforms and pyrotechnics for possible emergency use. I believe that this could be done without attracting any attention. In making this suggestion I have in mind particularly the possibility of civil disorder and looting. A request for an armed landing force would hardly be justified except under hazards of actual crisis, and under such circumstances the landing party would doubtless face heavy odds in its attempt to reach the Embassy. On the other hand if a certain amount of equipment were now to be transferred to the Embassy, I believe that this action would provide a certain degree of protection as we could probably bring unarmed enlisted men in civilian clothes to the Embassy whenever circumstances might make this desirable. This action could be taken without attracting particular attention and could therefore precede conditions of actual crisis. If you concur will you request the approval of the State and Navy Departments?" I do not see how any harm can be done, and I therefore concur and request necessary approval. JOHNSON 793.94/8291: Telegram The Ambassador in China (Johnson) to the Secretary of State 512. Following from Nanking: PEIPING, October 23, 1936-6 p. m. [Received October 23-9: 40 a. m.] "October 23, 9 a. m. Bond 43 this morning told me Bixby" is very apprehensive that the Chinese military authorities may utilize planes of the China National Aviation Corporation for military purposes thereby affecting status of the American pilots. Such action might cripple the activities of the corporation if hostilities were to begin. To protect both the status of the American pilots and the American capital invested in the corporation, Bond inquires on behalf of Bixby "W. L. Bond, vice president of the China National Aviation Corporation. "H. M. Bixby, president of China Airways Federal Incorporated, U. S. A., holding company for the American interest in the China National Aviation Corporation; also director of the latter. whether I would be authorized to make informal oral request of the Chinese military authorities on behalf of American interests involved that purely commercial character of the corporation's plane service be preserved in view of possible eventualities. I respectfully suggest I might speak informally to the Minister of War and the Acting Minister of Communications. Please instruct by telegraph.["] I informed Peck October 23, 9 a. m. that I approve action suggested in the last paragraph of his telegram. JOHNSON 793.94/8292: Telegram The Secretary of State to the Ambassador in China (Johnson) WASHINGTON, October 24, 1936-noon. 255. Your 511, October 23, 5 p. m. Department and Navy Department approve. Navy Department states that captain possesses authority to make such transfer. Please take complete and effective precautions that there be no publicity. HULL 793.94/8295: Telegram The Counselor of Embassy in China (Peck) to the Secretary of State NANKING, October 24, 1936-2 p. m. [Received October 24-9:25 a. m.] 314. My 312, October 23, 10 a. m. 1. The Minister of War insisted to me today that the object of the journey of General Chiang to Sian was really bandit suppression and was occasioned by the congregation of most of the Communist forces in the Northwest. He ridiculed the idea that any peaceful arrangement might be reached with the Communist leaders although he himself recalled that some time ago they issued manifesto announcing willingness to fight the Japanese under the direction of the National Government. The Minister of War seemed uncertain how long General Chiang would remain in Sian. The Minister of War said it was impossible that an airfield had been prepared at Paotow for the Japanese (see my October 23, 11 a. m.45) since "Provincial Chairman Fu Tso Yi is not that kind of man". He said recently the Japanese sent about 100 workmen including many Koreans and Japanese to Paotow to prepare a landing field but meeting with obstruction recalled the party to Tientsin. 2. I have seen a letter quoting Donald as saying on October 22, that General Chiang had been talking war with Japan for some weeks 45 Not printed. which indicated a great change in attitude. Ponald stated that General Chiang when leaving for Sian told his close friends that if everything went well they should celebrate his birthday October 31 in Kuling but that otherwise they must come to Sian. Donald interpreted the second alternative as indicating that Chiang foresaw the possible necessity of remaining at Sian in connection with actual or prospective hostilities with Japan. Unofficial but apparently reliable information is that if Chinese or Manchukuo troops invade Suiyuan Province local forces will resist but if Japanese troops take part National Government forces will immediately join resistance. 3. Sent to the Department, Peiping. PECK 893.506 Manchuria/24: Telegram The Ambassador in China (Johnson) to the Secretary of State PEIPING, October 27, 1936-noon. [Received October 27-8 a. m.] 46 517. Department's 3, January 4, 7 p.m., 1935; 46 Legation's despatch 3702, July 22, 1935. The Consulate General [at] Mukden reported by despatches Nos. 29 and 32 of September 25 and October 3, respectively, that a life insurance monopoly was evidently shortly to be established in Manchukuo. Copies of these despatches were sent to the Department and Tokyo. A news item appearing in the Manchuria Daily News for October 20 reports that an imperial ordinance was issued on that date authorizing the establishment of the "Manchuria Life Insurance Company" at Hsinking; the formal establishment was set for October 22. The capital is fixed at 3,000,000 yuan, one-half of which will be taken up by the Government. The tenor of the news item indicates that existing life insurance interests in Manchuria will not be eliminated from the field by this development, and this would accord with the information given in Mukden's despatch of October 3, but the Consulate General also reported that the state enterprise would receive a degree of protection from private competition and that the business of private companies, Japanese and others, would be subjected to restrictions. The Consulate General stated that the West Coast Life Insurance Company of San Francisco is the only American interest likely to be affected. In view of the prior unprotested establishment in Manchuria of numerous monopoly enterprises (note Mukden's despatch of September 25), and the circumstance that private enterprises apparently have the technical right of competing with the state enter46 Not printed. "Neither printed. |