THE FAR EASTERN CRISIS



the improvement of the position of General Huang Fu and his fol-
lowers vis-a'-vis the Japanese authorities, it would seem that any agree-
ment of importance relating to matters affecting North China would
presumably have to be approved by the National Government. A part
of the National Government is still, however, opposed to further con-
cession to the Japanese. For example, I was recently informed by the
local foreign Postal Commissioner that the question of resumption of
postal service between Manchuria and China Proper has reached a
deadlock notwithstanding the fact that it was recently believed-and
the Japanese Minister so stated-that through postal communications
would be resumed by the end of 1934. According to Dr. Chiang Mon-
lin, Chancellor of the National University of Peking, who is in close
touch with leading politicians, this deadlock was the result of severe
opposition which arose on November 14 at a meeting of the Central
Political Council of the Kuomintang, a number of its members insisting
that China should not yield another step to Japan.
  It is also too early as yet to attempt to foretell what effect the
strengthened position of General Huang Fu will have on Japanese
economic penetration in North China. The Legation is at present
unable to obtain information with regard to progress in this respect.
However, comment of Dr. Chiang Monlin on this subject may be of
interest. Dr. Chiang expressed the opinion a day or two ago that
such penetration-other than in the form of extension of trade-will
probably await that time when the Japanese military decide that it is
desirable to make a forward movement simultaneously in both North
and South China for the purpose of (1) strengthening its prestige
at home, (2) preparing for a conflict with Soviet Russia, or (3) trying
to obtain financial and economic rewards from China proper. He
does not believe that these forward movements will occur until after
the conclusion of the London Naval Conference.
  The changes reported above have caused, in conjunction with the
visit to North China of General Chiang Kai-shek, a number of rumors
to become current. One of these is that which was reported in
despatch No. 821 of November 16 to the Legation from the Consulate
General at Tientsin 32 to the effect that a secret Sino-Japanese agree-
ment had been reached by which the demilitarized area will be
extended southward to include all the territory lying north of the
Peiping-Liaoning Railway and to include the municipalities of
Tientsin and Peiping. The Legation has been unable to obtain any
confirmation of this report, although it is given some support by cer-
tain southward movements of Chinese troops in North China, by
reports that the limits of the municipality of Peiping may be extended

32 Not printed.



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