CO129-571-9 Sino-Japanese War- Canton-Kowloon railway 25-3-1938 - 28-2-1939 — Page 122

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Japan are incurred by the latest resolution, since

Article 16 can only be brought into operation by

declaration under Article 17 that there has been

"Resort to war" by Japan against China;

declaration was deliberately avoided at Geneva.

such

The

U.S.A. Government is, however, reported to have been

actively discouraging in the matter of export of

aeroplanes or grant of credit to Japan by American

nationals and is said to be contemplating further

administrative steps to restrict American supplies to

Japan.

We are now faced with the position that the

Japanese Forces have occupied the Hong Kong-Canton

Railway after considerable demolition to bridges etc.

have been carried out by the retreating Chinese.

The Governor of Hong Kong, foreseeing this situation,

has raised in No. 10 in this file a most important

question of policy, vis., is the Hong Kong Government

to comply with a demand by the Japanese in due course

to send by rail supplies of raw material to Japanese

interests in Canton as it has done in the past while

Chinese interests were intact? Are we now to cease

be a good neutral? From the Foreign office and

Admiralty point of view this situation presents itself

as an opportunity to bring pressure on Japan to

withdraw restrictions on British trade and shipping on

the Yangtae River. From the Colonial office point of

view we have to consider serious difficulties which are

incurred by the Colony with interruptions of

communications, food supplies, etc. by road and rail

and we are clearly warned by the Governor that the use

of