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(Enclosure in Dairen despatch to Tokyo No. 7 of 31st January, 1939.)

Extract from an Article entitled "A Review of the Thirty-Year Japanese Administration of the Kwentung Leased Territory and the South Manchuria Railway Zone" published in "Contemporary Manchuria January 1939.

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194

Although the advent of the new State of Banchoukuo on

March 1st, 1932, and the resultant change in the Manchurian

situation did not affect externally the legal status of the

Kwantung Leased Territory and the South Manchuria Railway

Zone, it is safe to say that Chinese sovereignty over these

areas was virtually placed in the hands of Manchoukuo. The

abolition of Japanese extraterritoriality and the transfer

of administrative rights in the South Manchuria Railway Zone

at the end of 1937 are particularly interpreted as the step

taken towards eventual abrogation of all special privileges

enjoyed by Japan in Manchuria, and infer the restoration of

the Kwantung Territory to Manchoukuo. However, so long as

no changes in the provisions regarding the continuation of

previous treaties are made, these treaties can be construed

as being effective in principle, and there is consequently

room for devising means to effect a diplomatic settlement of

the Kwantung restoration question

.It is construed that the South

Manchuria Railway Zone lease held by Japan for the past thirty

years has been actually annulled. If the principle underlying

the retrocession of lease rights were to be carried out to

the fullest extent, there would arise the necessity of

reexamining the status of the Kwantung Leased Territory, for

inasmuch as the Territory, which adjoins Manchoukuo and is

the gateway to that country, is closely and inseparably

connected with the new State politically and economically, it

is only natural to assume that friction with Manchoukuo's

administrative policy would occur if the Territory is placed

under a separate administration as an extension of Japan

proper as at present, and if no measures are devised to

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