reports from observers who have visited Shansi are to the effect that there exists the greatest activity there under Yen's direction, along the lines of education, propagandizing and organization, as preparation for reforms to be effected there at no late date. One of the interesting aspects of the situation is that groups of every political complexion have been drawn into those activities, with "radical" periodicals and literature as readily obtainable as the official Kuomintang interpretation of social economics, with the probable result that the orthodox Communist view, only slightly disguised under the veil of anonymity, has been able to compete freely for converts with other political ideologies.

An interesting commentary on the present state of affairs in Shansi was made by Chairman Hsü Yung-ch'ang in a newspaper interview given on February 24, on the occasion of his recent visit to Suiyuan as Yen Hsi-shan's delegate to the Suiyuan Mongol Political Council.‡ Yen Hsi-shan, Director of the new organ, according to Hsü could not attend because of the veteran general's concern with the threat offered by the Communists of north Shensi, where the situation was described as being "very tense". Hsü stated that the Communist leader P'eng Teh-huai had convinced the other Communist strategists that it was preferable to attack Shansi rather than advance northwards against Yülin, and thus to achieve the weakening of the defense line along the Paotow front. But, continued the Shansi Chairman, the Shansi troops in north Shensi would definitely not be withdrawn, although any threat on Shansi itself would be met by moving up other forces already in the province. (The fact that orders have already been issued for the return of the Shansi troops in north Shensi would seem to indicate that the threat is stronger than at first considered. Nevertheless, the evident fact that the Shansi militarists had prior knowledge of the impending attack should have enabled them to make defense preparations.) The Shansi defenses against Communism, he said, had been strengthened by the organization, under the direction of Yen Hsi-shan, of people's organizations called "Justice Corps" and "AntiCommunist Defense Militia", and Suiyuan was disposed to follow Shansi's example and set up similar organizations. However, when it came to the matter of rendering financial assistance to Suiyuan, Hsü was reported to have viewed the situation very pessimistically, saying,

"Shansi hasn't the slightest chance of doing it. Very shortly, incident upon setting up the Anti-Communist Defense Militia and administering other matters, the people's burdens will be increased by additional assessments. When Shansi has not time to care for itself, naturally it is impossible to discuss assistance to Suiyuan."

Ta Kung Pao (L'Impartial, Tientsin), February 27, 1936. [Footnote in the original.]

Hsü said that he had early recognized the dangers inherent in making new assessments on the people, but "The matter must be taken care of, and the only way is to ask the people for money." But the reporter observed that Hsü was from first to last oppressed by the problems offered by Shansi's finances. However, Yen Hsi-shan's proposal for the circulation of "commodity scrip" as currency had not been yet put into effect, according to Chairman Hsü, and Shansi's currency generally could be considered quite stable. (Independent information is to the effect that Yuan $2,000,000 of the province's Yuan $88,000,000 in currency is in the form of "commodity scrip".) Hsü Yung-ch'ang treated the subject of village ownership of land at some length, stating that the procedure for putting it into effect had already been settled upon but that the people viewed the project with alarm, while the Communists charged that "Of course this won't be put into effect, it being but a temporary expedient for the deception of the people." The reporter quoted Hsü as continuing:

"Our idea is that the methods of the Communist Party are too violent, leading inevitably to bloodshed. The procedure involved in the village ownership of land can avoid bloodshed; however, as regards the beginning of its application, it is undeniably impossible to avoid disturbances. We have not as yet come to the time for putting the plan into effect, and we do not plan now to do so. However, should it happen that we are pressed to a point where there is no way out, when it is impossible to avoid bloodshed, then we'll disregard popular disturbances (and go ahead with the project) by reason of our wish to avoid the shedding of blood."

It would appear as if the Communist challenge might directly or indirectly bring about interesting events in the sometime "Model Province" of Yen Hsi-shan. The implications those events would hold for Sino-Japanese relations may be readily deduced.

Respectfully yours,

793.94/7777: Telegram

NELSON TRUSLER JOHNSON

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

96

NANKING, March 5, 1936-noon. [Received March 5-9:25 a. m.]

50. 1. Chang-Chun yesterday told New York Times correspondent, but without as yet giving permission for publication, that (1) China had not agreed and could not agree to Hirota's three points and no written correspondence had been exchanged and nothing has been initialed or signed in this connection; (2) in November 1935 Chiang Kai-shek informed Ariyoshi that China was willing to consider the three points if comprehensively amplified and defined but

96 Chinese Minister for Foreign Affairs.

97

Chiang was speaking personally and not as a representative of the Government; and (3) a year ago, while en route to Europe, Wang Chung Hui " had proposed to Hirota a Chinese three point program involving (a) abolition of unequal treaties, (b) mutual cessation of actions and policies detrimental to the other and (c) settlement of outstanding questions through normal diplomatic means. (ChangChun recently remarked to me that he anticipated no immediate discussion of these matters with the new Japanese Ambassador and that he expected that any such discussion when begun would be protracted over a long period.)

2. Two days ago in Shanghai the correspondent interviewed Arita who said that (1) Chiang Kai Shek had given China's agreement to Hirota's three points and the Japanese were determined to hold the Chinese Government to that agreement and (2) the attempted military coup in Tokyo would not cause a stiffening of Japan's attitude toward China because that attitude was already very stiff. (Arita is arriving at Nanking today on a Japanese naval vessel to present his credentials.)

3. T. V. Soong 98 gave the correspondent his confidential opinion, not to be ascribed to him, that continued procrastination by the National Government in dealing with Japanese issues would make hostilities between the two countries inevitable and that acceptance of the Japanese program would mean civil war in China. Repeated to Peiping, Tokyo.

JOHNSON

894.00/636

Memorandum by the Counselor of Embassy in China (Peck) 99

NANKING, March 5, 1936.

In the course of a general conversation 1 Dr. Kung said that he was sometimes a little surprised at the lack of appreciation of the United States and of European Powers of the serious threat to international peace and security offered by Japanese imperialistic ambitions.

Dr. Kung remarked that in pursuit of these ambitions China was an instrumentality through which Japanese militarists hoped to acquire the power necessary to extend the beneficent rule of the Japanese Emperor, not only over Asia, but actually over the world. Looking upon the far-flung British Empire, Japanese militarists did not

97 Chinese judge, Permanent Court of International Justice at The Hague. 98 Former Chinese Minister of Finance.

" Copy transmitted to the Department by the Ambassador in China in his despatch No. 112, March 6; received April 6.

Between the Ambassador in China and the Chinese Minister of Finance, Vice President of the Executive Yuan (Kung).

perceive why the Japanese sun should not shine over an equally extensive chain of possessions.

If Japan had taken pains from the beginning to cultivate friendly feelings on the part of the Chinese, the materialization of their dream might have been perceptibly advanced by this time. Admitted to friendly cooperation, the Chinese might have seen something in the idea of "Asia for the Asiatics". Owing to the realities of Japanese operations, however, the Chinese understood that this idea was merely a cloak for Japanese ambition to extend Japanese domination.

Dr. Kung said that the army and navy of Japan have differing ideas regarding the steps which should be taken in the immediate future. The army believes that it would be best to wrest territory on the mainland from the Soviet Union and from China, whereas the navy believes that the next logical expansion should be toward islands in the South Pacific and adjacent to the southeastern coast of Asia, including those in the possession of European countries. Dr. Kung referred to the well-known economic invasion by the products of Japanese industries into the markets of the Occidental Powers, and even into those countries themselves. He said it was being claimed that British workmen in Lancashire were clothed in garments woven in Japan. He prophesied that the armed strength of Japan would some time be utilized to break down the tariff and other barriers with which modern industrialized nations now attempt to preserve their markets. On this account, i. e., the threat to their territorial possessions and to their markets, he could not understand why the western powers seemed so indifferent to the steps now being taken by Japan to consolidate and expand the bases of Japan's military strength.

Dr. Kung expressed the opinion that the policy of providing for "collective security" would require that the nations thus threatened should take steps to curb Japan's present actions and future ambitions. WILLYS R. PECK

793.94/7778: Telegram

The Counselor of Embassy in China (Peck) to the Secretary of State

51. My 50, March 5, noon.

NANKING, March 6, 1936-2 p. m. [Received March 6-6:52 a. m.]

1. This office is reliably informed that at an emergency Cabinet meeting called this morning to discuss the Communist situation in Shansi it was announced that a threat had been received from Japanese Military Attaché Isogai to the effect that the Japanese will not permit the sending of Central Government troops into Shansi to oppose the Communists unless the Chinese Government agrees to Hirota's three point

program and even in that case any troops thus despatched must be withdrawn when their mission against the Communists is completed. 2. Repeated to Peiping and Ambassador at Shanghai.

893.00/13387: Telegram

PECK

The Counselor of Embassy in China (Lockhart) to the Secretary

of State

PEIPING, March 7, 1936-5 p. m. [Received March 7-9 a. m.]

119. Embassy's 116.2 Following from American Consul General at Canton.

"March 6, 9 a. m. Referring to my telegram of March 5, 4 p. m., rift between Marshal Chen and Hu Han Min group widening. Day before yesterday Chen took over from Tsou Lu control of all local Government educational institutions other than Chungshan University in the control of which institution Tsou has recently had strong backing from Nanking. Chen's action thus appears to be further direct challenge to Nanking authority here.["]

LOCKHART

793.94/7793: Telegram

The Counselor of Embassy in China (Peck) to the Secretary of State

NANKING, March 14, 1936–9 a. m. [Received March 14-7 a. m.]

53. 1. This office has been informed by a responsible official of the Executive Yuan that, (1) United Press reports that the Yuan order No. 12 "decided to use armed force for the suppression of Japanese smuggling in North China" are untrue; (2) Executive Yuan, after discussing this problem decided merely to issue instructions to the natives "to employ effective measures"; (3) the Yuan is hoping to inspire commercial and other public opinion against the purchase of smuggled goods some of which are now being shipped south on both the Tientsin-Pukow and Peiping-Hankow Railways; (4) the Chinese authorities are unable to stop the smuggling operations because the Japanese military have refused to permit armed customs troops to proceed against smugglers along the coast on the ground that such action would violate the Tangku truce and have warned the Chinese against

* Dated March 6, 5 p. m., not printed.

Chen Chi-tang, leading military commander at Canton.

Inactive chairman of the standing committee of the Kuomintang Central Executive Committee.

* Chancellor of Chungshan University, Canton.