sador said that the account given in this morning's New York Times of Japan's demands seem to coincide substantially with what the Japanese Ambassador in Paris had told the Minister for Foreign Affairs. I pointed out that, whereas the reports hitherto have indicated that Japan was demanding that Japanese troops be permitted to cooperate with Chinese troops where the latter are fighting communism in China, the newspaper report of this morning to which the Ambassador referred made it appear that the demand was for military cooperation in fighting the "menace of communism from a third country." The Ambassador said that this latest newspaper report on that point coincided with the representation of the Japanese objective which had been made by the Japanese Ambassador in Paris.

The Ambassador made certain observations with regard to what seemed to him to be similarities between the Chinese political psychology, with which he said he was not acquainted at first hand, and the Russian psychology, with which he had had first-hand experience and observation.

The conversation ended with reciprocal assurances with regard to exchanging of further information when and as received. S[TANLEY] K. H[ORNBECK]

793.94/8258: Telegram

The Ambassador in China (Johnson) to the Secretary of State

300. My 298, October 9, 4 p. m.

NANKING, October 14, 1936-11 a. m. [Received October 14-7: 37 a. m.]

1. Sino-Japanese situation remains calm and probability is that present lull will continue. Hsu Mo informs me that at yesterday's preliminary conversation between Suma and Kao Tsung Wu, chief of the Asiatic Affairs section of the Foreign Office, the latter explained to Suma the Chinese attitude which he presumed Kawagoe was communicating to his Government and that now they were awaiting further approach from the Japanese.

2. Hsu Mo states that present negotiations differ radically from those which characterized the presentation of the twenty-one demands 35 in that whereas in that case the demands were specific in this case the Japanese have laid down general principles subject to diverse interpretations. He informed me that the Chinese had asked the Japanese to bring to them a detailed statement of their desires, explaining to me that certain of these general principles were on the surface innocuous. He said that there was no truth in published reports that the Japanese desired to station troops along the Yangtze or that the Japanese demanded the independence of North China. 35 See Foreign Relations, 1915, pp. 79 ff.

With reference to North China he said that the Japanese had merely asked the Central Government to give the local authorities a free hand in negotiations there but that the Chinese Government hesitated as it was unwilling to give blanket authority. He said that the Japanese had objected to the preponderance of European and American foreign advisers over Japanese advisers and that the Chinese Government in reply had indicated willingness to use Japanese advisers in technical lines if it were left free to hire and discharge Japanese at will as it had been free to do in the case of advisers of the other nationalities. Mr. Hsu expressed himself as feeling that the situation was dangerous as there was no leadership in Japan able to control ambitions of military who apparently were committed to a program intended to place China under the complete control of Japan.

3. In concluding our conversation Hsu Mo asked whether I had any information from the Department or from our Embassy at Tokyo in regard to our attitude in these matters. I said to Hsu Mo that our interest in conditions here in the East was crystal clear; that it had been amply covered and explained in times past and that there was no change in attitude now. I said we were deeply interested in developments and that I would be grateful to him if he could keep Mr. Peck and myself currently informed in order that we might adequately inform the American Government.

4. To the Department, copy to Peiping by hand of the Ambassador. JOHNSON

793.94/8346

The Ambassador in China (Johnson) to the Secretary of State No. 778

PEIPING, October 15, 1936. [Received November 16.]

SIR: I have the honor to transmit herewith a copy of despatch No. 66 of October 9, 1936, from the Consulate at Tsinan 36 in which Consul Allison reports the opinion of the Secretary of the German Embassy in Tokyo to the effect that Japan is not ready to engage in war at this time for the following reasons:

1. The economic and financial situation in Japan is extremely serious.

2. The Japanese Army is not in sufficiently good condition. 3. Japan has no international agreements which would be of assistance in case of war.

Respectfully yours,

For the Ambassador: GEORGE R. MERRELL, JR. First Secretary of Embassy

86

Not printed.

CHAPTER IV: OCTOBER 16-DECEMBER 31, 1936

Possibility of break in relations between China and Japan over excessive demands by latter; improvement of Japanese-Soviet relations; authorization of North China-Manchuria air service; unlikelihood of neutralization of Shanghai; defeat of pro-Japanese forces in Suiyuan; German-Japanese accord against Communist International and setback to Japanese-Soviet relations; Japanese-Italian agreement on Ethiopia and "Manchoukuo"; Japanese demonstration at Tsingtao by temporary landing of marines; forced detention at Sian of Generalissimo Chiang, December 12-25; surrender of Chang Hsueh-liang, a ringleader in Sian mutiny; settlement of Chengtu and Pakhoi incidents.

793.94/8264: Telegram

The Counselor of Embassy in China (Peck) to the Secretary of State

NANKING, October 16, 1936-7 p.m. [Received October 16-11: 10 a.m.]

304. 1. Government department is reliably reported to be packing archives preparatory to removal of the Government from Nanking possibly to Changsha.

2. Responsible officers of the Government have just informed me, however, that although minute plans have been prepared to effect removal when hostilities seem unavoidable this crisis does not seem imminent. One of these informants stated that in the most recent conversations between Suma and the director of the Asiatic Department the former has strongly insisted on joint military operations against Communistic menace in Hopei-Chahar and Suiyuan and on joint economic activities in Shantung, Shansi and Suiyuan and has placed lessened emphasis on the other proposals. The other informant did not think the Japanese would press negotiations to the point of open break at the moment possibly because of unstable condition of the Japanese Cabinet but he asserted that "anything might happen." It is confirmed that Han Fu Chu is arriving at Hangchow October 17 to confer with Chiang Kai Shek.

Repeated to Peiping, by mail to Tokyo.

PECK

761.94/931

The Chargé in Japan (Dickover) to the Secretary of State

No. 2091

TOKYO, October 16, 1936. [Received November 2.]

SIR: With reference to the Embassy's despatch No. 2069 of October 2, 1936, I have the honor to report that Soviet-Japanese relations have shown a tendency to slight but steady improvement during the past two weeks, the chief contributions to this improvement being the

"Not printed.

reported settlement of two outstanding causes of friction, namely the fisheries treaty question and the extension of the Japanese oil concessions in North Saghalien.

According to reports here the agreement regarding the fisheries question was reached at Moscow on October 2, 1936. As will be recalled the present treaty expired in May, 1936, and had been extended to provide further time for negotiations. It has now been agreed that the new treaty will run for eight years, which is a compromise between the Japanese demand that it be valid for twelve years and the Soviet Government's desire to limit it to a five year period. The treaty, which it is predicted will be concluded by the middle of November, will provide for the continuation of the system of bidding for fishery grounds in certain areas, restrictions upon the amount of fish to be taken in the open sea, the protection of fish, and the prohibition of fishing in Kamchatka rivers. The value of the rouble for the payment of rentals on fishery grounds, a subject of great controversy heretofore, has been settled at 32.5 sen, but this provision is effective for only five years of the treaty, the rate being subject to revision by agreement at the expiration of that period.

The negotiations regarding the extension of the Japanese oil concessions in North Saghalien were successfully concluded at Moscow on October 10, 1936, between Vice-Admiral Masazo Sakonji, President of the North Saghalien Oil Company, and Mr. Lukinovitch, Vice-Chairman of the People's Heavy Industries of Soviet Russia. The details of this agreement have not yet reached here but it is understood that it will run from [for?] five years from January 1,

1937.

With the fisheries and the oil questions apparently settled the attention of the Japanese is next turning to the question of the establishment of a commission for the settlement of border disputes and a clear definition of the Soviet-"Manchukuo" frontier.

There has been a disposition in the press lately to comment with satisfaction and at some length upon the "brighter and more cheerful aspect" of relations between Japan and Soviet Russia. The superficial and temporary improvement cannot be doubted and the elimination for a certain period, at least, of the troublesome fisheries and oil questions admittedly makes the conduct of pleasant relations more hopeful. The only untoward incident which has occurred between the two countries during the past two weeks is another border skirmish between a "Manchukuo" patrol and O. G. P. U. troops on October 11 at two points on the "Manchukuo"-Soviet eastern frontier; one halfway between Yangkuanping and Chiushaping on the Tumen River, and the other near Matita, near Hunchun, both points in the province of Cheintao. There were several casualties, including one Japanese soldier killed. On the following day a small Japanese de

tachment, searching for the body of this soldier missing in the previous day's engagement, was met with further fire from Soviet troops and the Japanese officer leading the detachment did not return. While a protest was filed by the Soviet Government with the Japanese Chargé d'Affaires at Moscow and it is expected that similar action will be taken by the Tokyo Foreign Office, there appears to be no intention on the part of the Kwantung Army authorities to let the matter assume serious proportions. An official communiqué in the matter was issued by the headquarters of the Korean Army at Seoul which stated, in part: "The case will be transferred for diplomatic settlement to the Foreign Office authorities upon conclusion of the investigation on the spot. The army headquarters judge from the present circumstances that it will not assume proportions".

Although the foregoing is evidence that the Japanese authorities were at first disposed to minimize the importance of these incidents, a few days later a further statement was issued by the Kwantung Army calling attention sharply to the evident purpose of the Soviet authorities to interfere with the pursuit of amicable relations between the two countries. A possible reason for this apparent change of attitude may be found in the Yomiuri's Hsinking correspondent who, in reporting the Kwantung Army's communiqué, suggested that the reason why the Soviets provoked the most recent incidents was to embarrass the Nanking negotiations which in the view of the Soviet Government were progressing too smoothly and might therefore lead to the establishment of a Sino-Japanese arrangement for the joint defense against communism.

To revert, however, to the recent comments in the Japanese press on the brighter aspects of relations between Soviet Russia and Japan, many reasons are advanced for this state of affairs; the Japanese take the view that the Soviet Government is beginning in general to display a more conciliatory attitude due to the developments in Europe which are tending to expose Russia to the threat of military action in the West. Added to this is the revelation this summer of the antiStalinist plots and the dangers to the internal structure of the Soviet political machinery.

One paper, the Nichi Nichi of October 8, 1936, says that the failure of the Soviet authorities to take a positive attitude in the question of border incidents is taken by the Foreign Office as proof that Soviet Russia has at last come to understand the real intentions of Japan's continental policy. There is, however, no evidence that the Foreign Office authorities believe this; on the contrary this very point is one of the two main outstanding difficulties in the way of a real and basic improvement of relations between the two countries. It will be recalled that in his address before the Diet on May 6 last, the Foreign Minister, Mr. Arita, stressed the fact that the main obstacles to the