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2. The military situation in China up to 10 A.M. on the 14th April is as follows:-
Civil War.
(a.) The Northerners continue to make progress on the left bank of the Yangtse. Pukow was occupied on the afternoon of the 12th by Shantung troops, the Nationalists withdrawing across the river to Nanking.
So far no attempt seems to have been made by the Northerners to enter either Nanking or Chinkiang: the immediate "Northern "plan seems to be to work west- wards and to clear the left bank of the Yangtse of Nationalist troops. The Military Attaché, Peking, believes the next Northern objective to be Anking (halfway between Nanking and Hankow); the Nationalists are stili 100-200 miles north of Anking, but there are signs of a Nationalist retreat back to the Yangtse.
Chiang Kai-shek has gone to Nanking-possibly to rally the retirement, possibly to make some arrangement with the Shantung Commander. For the first time in the campaign, Southern formations are deserting wholesale to the "North."
(b) On the Hankow-Peking railway fighting is in progress 80 miles north of Hankow, but it is unlikely that Chang Tso-lin will press on to Hankow until Anking is captured.
Split in the Nationalist Party.
The military aspect of this dissension grows, and Chiang Kai-shek apparently feels himself strong enough to adopt an independent attitude rather than to bow to the Hankow communist-extremists whose power is exercised through the Labour Unions.
The army seems loyal to Chiang. At Shanghai, Chiang has raided and disarmed the mercenaries of the local Labour Union, but has not succeeded in eliminating the Communist element. The IVth Army-also loyal to the Commander-in-Chief-has occupied a strategic position on the lines of communication between Hankow and Canton. Even at Hankow many military elements are ready to support Chiang.
Chiang Kai-shek is reported to have convened a "moderate" conference at Nanking. The outcome of this conference should throw an important light on the stability or otherwise of the Nationalist politico-military machine.
3. The bearing of the above military situation on the question of sanctions is as follows. The forts and arsenals on the Yangtse, which had been designated for destruction as a form of sanction, are likely before long to fall into the hands of the Northern Chinese. As the latter did not destroy them on their evacuation in retreat, they may have had in mind the desirability of utilising them in the event of their return, and (as pointed out to the Cabinet by the Chief of the Naval Staff) would We probably be antagonised by their destruction by the Powers or by ourselves. have considered the possible alternative of occupying these positions with a military force and handing them over intact to the Northerners in the event of their arrival. This, however, would involve locking up troops for a period the length of which cannot be measured, and we therefore decided to reject this idea. A further objection to any action against the forts is that they are at present held by the forces of Chiang Kai-shek, who is now openly defying the extremist elements in the Southern Govern- ment and is not unlikely to deal with the forces from Hunan who support the extremist party and were responsible for the outrages at Nanking. Any action taken against the forts would prove detrimental to Chiang Kai-shek and tend to antagonise him, which, in the above circumstances, is obviously undesirable.
In present conditions, therefore, we recommend that the destruction or occupation of the forts on the Yangtse and of the arsenal at Hankow should be abandoned as a measure of sanction, though, if circumstances change, it might still prove useful.
4. We have also considered the possibility, mentioned by the Secretary of State for Foreign Affairs at the last Cabinet Meeting, of a re-occupation of the British Concession at Hankow. If this operation were undertaken, it would be necessary to place a military garrison in the Concession, and this new military commitment would be undertaken in the heart of China, 600 miles up the Yangtse. Having regard to existing commitments, we do not consider this a feasible operation.
5. In the circumstances, the only sanctions which we are able to suggest are:—
(i.) The seizure of the Cantonese Fleet;
(ii) The seizure of Customs revenues;
(iii.) The destruction of the Dane Island and Bogue Forts at Canton.
On these proposals we offer the following preliminary observations.
6. The seizure of the fleet is undoubtedly a feasible operation which should exercise some effect on the Cantonese. We feel bound to mention, however, that at Amoy, where disturbances were reported a short time ago, the situation is now peaceful, chiefly due to efforts of Chinese Naval Authorities" (Commander-in-Chief's telegram No. 949 of the 7th April).*
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7. The seizure of Customs revenues can hardly be described as a "military sanction, but appears to us one the possibilities of which ought to be explored. In this connection we draw attention to Sir Miles Lampson's telegram No. 674 of the 11th April* on the subject of sanctions, in which the following remarks occur :-
"As regards reparation, Consul-General's estimate may seem very large, but it is clear from reports of looting that very extensive damage has been done. American estimate of their losses is, I believe, even greater. I think it can be accepted as quite certain that Nationalists will never voluntarily produce amount of required compensation. On this head I suggest we should at once consult His Majesty's Consul-General at Shanghai to ascertain whether proceeds of surtaxes at Shanghai can be impounded and what steps should be necessary. If they can, we might consider at once pressing for this being done. Nationalists are reported to have railway loan of 5,000,000 dollars in Chinese banks on their security, but there is no reason why we should allow this money to be used for further military operations when they have thrown off all semblance of anything but open hostility to us. In this connection we have to-day reports of Kiukiang Consulate being occupied and looted, and of Chinkiang Consulate also being seized."
It has to be borne in mind that the impounding of the proceeds of the surtaxes would probably react immediately on General Chiang Kai-shek's position and would probably impair his financial resources. We venture, however, to recommend that the Secretary of State for Foreign Affairs should consult the Consul-General at Shanghai on Sir Miles Lampson's proposal as quoted above, inviting his views at the same time on the bearing of the proposed action on Chiang Kai-shek's position.
8. The third possible sanction is the destruction of the Dane Island and Bogue Forts covering the main approaches by water to Cauton. This course was recommended by the Governor of Hong Kong in a telegram* dated the 26th March, and was concurred in by the local Naval and Military authorities. In our Report of the 29th March (Paper No. C.0.S. 69) we rejected the proposal on grounds explained in the following
extract:
"This operation would involve the use of military forces and the occupation of Chinese territory. Insufficient troops for the purpose are available at Hong Kong, and those surplus to the garrison of that fortress form part of the Shanghai Defence Force and ought not to be committed to any other operation. In fact, generally we are opposed at this juncture to any action which would involve an additional commitment of unknown scope in China involving the land forces."
The objection in regard to the occupation of Chinese territory no longer applies when sanctions are under consideration, but the above objection in regard to the availability of military forces still holds good. Nevertheless, in view of the fact that almost all effective sanctions in the Yangtse region are ruled out in present circum- stances, as explained in the foregoing paragraphs, we think that the possibilities of action in the neighbourhood of Canton ought to be further explored. The Chief of the Imperial General Staff has accordingly undertaken to instruct the General Officer Commanding at Hong Kong, in concert with the Senior Naval Officer, to report his general views as to the feasibility of the operation and the forces required in present circumstances. The Chief of the Naval Staff is, at the same time, authorising the Senior Naval Officer to confer with the General Officer Commanding, and is instructing him that, if aerial reconnaissance and photographs are considered desirable, he should first ascertain from the Acting Consul-General at Canton whether there is any political objection. The Chief of the Naval Staff is also asking the Senior Naval Officer to consider whether aerial reconnaissance would militate against surprise, and ought, therefore, to be reserved until attack is imminent. We recommend that the Secretary
* Not reproduced.
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