CO129-585-9 Sino-Japanese conflict- Chinese custom stations 14-7-1940 - 17-12-1940 — Page 26

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4.

It is confidentially and authoritatively disclosed that the Kowloon Customs issue is essentially political, that the importance the Japanese place on gaining immediate recognition of their "control" over the Head Office in Hongkong of the Kowloon Customs is in some extraordinary and unexplained manner connected with a desire that such an event should play a part in a general scheme to demonstrate effectively to Great Britain at an opportune moment that Japan has completed her conquest of China and is determined to brook no interference with her plan for the New Order in Asia"; and that delay cannot be tolerated, lest by the autumn Great Britain should be in a position to assume a stronger attitude in the East.

ARE

How far the Japanese arguments and threat are merely bluff intended to induce the Inspector General to submit to their demands, and how far they are prepared to go at the moment in the actual execution of their threat, it is not possible to gauge. In the manner of presentation of their demands there is a ring of greater force and determination than was the case last autumn, and the Inspector General (who is generally regarded as a sort of international trustee for certain foreign trade, shipping, end financial interests in China or what is left of them) cannot afford to disregard these demands in their entirety. Since the commencement of the "China incident" the preservation of the Customs Service and the so-called Inspectorate system has been maintained more or less by argument and persuasion, and temporising and bending somewhat where non-essentials are concerned and where it has been within the competence of the Japanese to meet actual refusal with force. In the present case of the Kowloon Head Office refusal cannot be met by force, it is true, but disruption of the Customs Service as a whole in occupied areas is threatened insteed. Obviously, therefore, if the integrity of the Service is to be maintained it is essential thet some sort of formula be devised calculated to satisfy to some extent the Japanese exorbitant demands as out- lined above, without unduly upsetting Chungking. Possibly a solution may be found in the appointment to the Kowloon Customs Head Office in Hongkong of a Deputy Commissioner (or Officer of lesser rank) of Japanese nationality to act as a liaison-officer and interpreter in connection with the Frontier Stations situated in the "occupied area". But even if this solution is accepted as a compromise by the Japanese Authorities (and provided, of course, that the Hongkong Government offer no objection) it is likely to incur criticism from the Chungking Government; and there also remains the possibility of a withdrawal of the Japanese occupying forces from the whole Frontier after such an appointment has been made, thus giving rise to an awkward situation.

The Customs position generally nasbecome more serious and complicated of late, and while it is realised that existing world conditions may render