FOREIGN RELATIONS, 19 3 4, VOLUME III



work on roads, sanitation, and irrigation; the establishment of the
China Development Finance Corporation for the purpose of organized
economic development of China; and some discussion of ways to
develop the Northwest. In no instance was there assurance that
these reforms would be implemented with action of substantial sig-
nificance.
III. Foreign Relations:
  a. Japan: During this period it became evident that further ag-
gression by the Japanese military was at least in abeyance pending
the outcome of Japan's efforts to obtain its ends in China by "di-
plomacy". Although these aims were not definitely known, they were
believed to include economic and financial expansion in North China,
which would eventuate in political dominance, improved trade con-
ditions with China as a whole, and preeminence (at least) among
foreign powers in extending "assistance" to this country. The an-
nouncement, without serious repercussion, of agreement for the re-
sumption of through passenger traffic on the Peiping-Mukden Rail-
way, indicated the acquiescence of China's leaders to the policy of
procrastinating in conceding to Japan's demands to a point just short
of precipitating action by the Japanese military, while at the same
time efforts should be made to build up China's powers of resistance.
In the relations of General Chiang with other ambitious military
leaders, described above, it was evident, perhaps for the first time,
that at least some of the militarists deemed it expedient to defer their
personal ambitions to the Japanese menace.
  b. Western nations: The question uppermost in the minds of West-
ern observers during the period under review has been whether China
would not turn less and less to Western nations for aid in economic
(and military) restoration in view of Japan's increasingly frank
disapproval of such cooperation. Certainly the general attitude of
the Chinese during the first half of the year in their relations with
Western powers has been less intransigeant than usual as a result
of the Japanese threat.
  Respectfully yours,                   NELSON TRUSLER JOHNSON

893.01 Inner Mongolia/27
    The Ambassador in Japan (Grew) to the Secretary of State

No. 894                                      TOKYO, July 18, 1934.1
                                             [Received August 6.]
  SnI: I have the honor to refer to my despatch No. 793 of May 18,
1934,50 on the subject of Soviet-Japanese Relations in which were out-

' Not printed.



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