55
46
elements were concerned. If Great Britain were to exercise as great a degree of firmness as the United States I think it would help towards an eventual settlement.
169. Every Japanese I met agreed that a strong Central Government in China was vital to any future stabilisation, and none of them really believe that this will come through Wang Ching-wei. The danger is that their present policy-if it succeeds at all, which I do not for a moment believe it can do will result in the break up of China and a new period of war-lordism or revolu- tion. It seems to me, therefore, that whatever the difficulties may be over the next year or so because of the stalemate position in China, Great Britain and America ought to do their utmost to give the Chiang Kai-shek Government enough support to maintain its power as a Central Government. If this is done, then when the time comes-as some day it must--there will be a Government to represent China which will be capable of arriving at a final settlement.
170. I asked the Vice-Minister for Foreign Affairs about Leyton Stewart's visit to Chungking, and ascertained that he knew all about this and was not apparently hostile to it, but he stated categorically that he had no knowledge of any
terms" that Leyton Stewart was carrying, and that certainly these had no connexion whatever with the Japanese Government.
C
171. I should also add that we found ourselves compelled to spend some days in Formosa owing to transport difficulties, and had some opportunity of hearing about Japanese colonial administration. An extract from the diary on this subject matter is appended.(*)
172. Though it may not be directly in point on this subject matter, it is important to observe the very great effort that the Japanese are making to control Siam. We had evidence of this from at least three sources. First, the very large number of young Siamese who are being brought to Japan for their education there; second, the virtual exclusion of the British oil companies from Siam; and third, the extension of Japanese commercial and agricultural activities in Siam which are reported in the Japanese press. These factors, together with the wholesale employment of Japanese advisers in the navy and elsewhere, is likely to be a great menace to British and French possessions which border on Siam.
173.
Recommendations.
Before setting out the recommendations that I should like to make upon specific points, it may be of some use if I set out what, to me, seem to be the alternative possibilities in the development of the Sino-Japanese war. These are as follows:-
(1) A complete victory by Japan and the consequent colonisation of China upon the lines adopted in Formosa. This I regard as almost out of the question and I do not think that anyone even the most extreme militarist in Japan-has convinced himself of such a likelihood. (2) A partial victory, by Japan stabilising the present occupied area and extending it to all the eastern parts of China. This would be by means of a puppet Government, such as the Wang Ching-wei Government, completely under Japanese domination and ruling through a Japanese army and a Japanese-controlled police. This is undoubtedly a possibility, but would lead to a practically perpetual state of civil war in China with a division between the east and west, and would deprive the east of access to the hinterland upon which it has always relied for its prosperity. It would not be a stable state of affairs and, unless the Western Government had a great deal of support from the western democracies and America, there would be a strong tendency for it to fall under the control of the Soviet Government. This would then bring about a state of affairs equivalent to the partition of China into Russian and Japanese spheres of interest, with the complete exclusion of all other Powers from China. Alternatively, the Government in the west might break down and war-lordism and chaos result, in which case it is quite clear that Russian influence would succeed in converting Western China to communism and then a close alliance would be formed with Russia, again resulting in a virtual division of China into Russian and Japanese spheres of interest.
(*) Not printed.
47
(3) A condition of stalemate in which both sides realise that neither can defeat the other. In this case there will eventually have to be some form of peace, and if Great Britain and America can act as honest brokers, it is possible that some modus vivendi might be found which would last for a period. I do not believe, however, that any arrange- ment can be permanent which allows the Japanese military or police to remain in any part of China proper. This outcome looks at the moment the most likely if the internal condition of Japan is disregarded and if an unoptimistic view is taken of the internal Chinese situation.
(4) A victory for China through the economic exhaustion of Japan and the consequent gradual withdrawal of the Japanese forces. it may be under cover of setting up a puppet Government which is then left to look after itself. This would mean either a civil war or else some sub- mission of the puppet Government to the Chinese National Govern- ment. This I regard as the more probable outcome, though it will take a very considerable time to develop, possibly some years. Such an outcome might precipitate an internal clash in National China, setting the more violently anti-Japanese elements against the appeasers, which might lead to a clean-up of the Central Government, either with or without violence.
(5) An early agreement between the two countries on the basis of war exhaustion and the desire for future friendly relations. This would be most desirable and is the wish of the Japanese Liberals, but I can see no possible way in which the face" of both sides could be saved so as to arrive at such an agreement. No Japanese Government could stand up to popular opinion if it were to withdraw from China without any visible gains, and no national Chinese Government could survive which allowed the Japanese to remain in China after the declaration of peace. The Japanese fear of Russia and the conse- quent demand that China should avow an anti-Comintern policy also creates an almost impossible barrier to peace in view of the geographical and economic position in China and of the fact that such a course would inevitably precipitate internal difficulties in China. 174. So far as the interests of non-Asiatic countries are concerned (in which expression I do not include Russia) any result which led to the monopolisation of China by Asiatic interests would be disastrous economically.
The present condition of affairs in, e.g., Canton is illustrative of what would happen in such circumstances. Technically, Japanese imports are on the same basis as those from other countries. In practice, every Japanese boat that comes into the port does so as a military transport and refuses to have anything to do with the customs authorities. A volume of Japanese imports of all kinds for the civilian population is brought in by these boats and such goods are entirely free of any import duty. All trade by other nationals has been completely stopped except for stores going to the concession, upon which customs duties are payable in the concession. By these means the Japanese have, in fact, a complete monopoly of the import trade. The only way to prevent this virtual exclusion from the Chinese markets is, in my opinion, to maintain a strong Chinese National Government which can either be victorious over Japan or else can remain in power long enough, and be sufficiently strong eventually, to make a peace settlement which will preserve the independence and integrity of China, and at the same time we must maintain friendly and sympathetic relations with that Government.
175. It must, however, be borne in mind that this result will not necessarily come about automatically, since there is always the danger of either a Japanese victory or the virtual partition of China into Russian and Japanese spheres of interest. The future can only be secured if the democracies are prepared to give active and sustained help to support the Chinese National Government. The best steps that could be taken would be to concert measures with other Govern- ments friendly to China, whereby sustained and effective help could be given financially and economically to the National Government in China. I desire to emphasise the fact that it is only the basis that this cannot or will not be done that I append the following recommendations which would at least enable us to maintain the sympathy and friendship of China, though not giving her all that she would like. The recommendations vary in importance and in the degree
56