In my comment 567 to Admiralty on H.M. Ambassador Tokyo's telegram 1187 to Foreign office I stated (with reference to south China Coast generally) that "the suggestion that Japanese Naval Authorities

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for us is against us'; and to consider the merits of an active

policy to be instituted against the unfriendly powers. I pro-

pose to discuss this question further in the appropriate

section of this report.

5. The study of these two points, (a) the progress made

by Manchoukuo since 1932 (b) her foreign relations, necessarily

occupies considerable space and minor events of the year, which

have been reported from time to time, are omitted. The posi-

tion of the British trader, threatened at one time with eclipse,

has been ever so slightly improved in the second half of 1938

(paragraph 37). Problems of the future are the treatment of

perpetual leases (paragraph 42) and the relations between the

foreign missions and the authorities (paragraphe 77 and 78).

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