4-1
2.
there are alread indications that this is their intention.
A good deal however ay depend on how situation develops in Shanghai. The Chinese put, their best troops in the field here and efforts of Japanese to break through their line have hitherto failed. The Chinese are confident of their ability to hold Japanese in this area but they are doing so by denuding other fronts of essential equipment and Japanese may find it pays them better to press attack from the north than to attempt to force Shanghai line.
The Military Attaché takes the view that Japanese are likely to break Central Government forces and that they will Smash away until they have one so. If pressure is ept up on all fronts it should not be long before Chinese stores are used up, and they cannot import enough in face of Japanese command of the sea to keep large scale hostilities going short of help from outside; therefore it is only a question of time before Chinese resistance is broken on all fronts and inevit-
able disintegration sets in.
I would like to make it clear however that there are at present no signs of disintegration and that Chinese morale is still high and is likely to continue as long as supplies of war material can be obtained. A danger point will come if it does not come earlier, when Chinese Goverment is forced by military or air action to vacate Ranking.
Present indications are however that Japanese are un- willing to proceed to extremes against Nanking as long as there is any hope of obtaining a political settlement with Chiang Kai-shek and I am inclined to think they may go on waiting before taking the gloves off to see latter's reaction Lo terms which I communicated to him. At any rate it has
been