North China: Its Position and Internal Conditions
Cabinet Information Bureau
Since the establishment of the new Central Government at Nanking, the importance of North China has been felt all the more keenly. What is the reason for this renewed interest in North China? The answer is that the policies followed in North China, a region inseparably bound up with Japan and Manchoukuo in so many respects, and the policies of the new Central Government, which has become the legitimate government for all China, must agree in complete harmony. No inconsistency or conflict of interest can be allowed to exist between the policy of effectively developing the real worth of North China and that of consolidating the Central Government and extending its influence.
The outstanding characteristic of North China is that its geographical position constitutes a zone of vital importance to the national defence and economy of Japan and Manchoukuo.
Strange as it may seem there is no fixed geographical concept regarding North China. For example, there are people who consider that North China consists of the five provinces of Hopei, Shantung, Chahar, Suiyuan and Shansi, while others hold that it is made up of the three provinces of Hopei, Shantung and Shansi or the region which was formerly under the jurisdiction of the Provisional Government at Peking and now under that of the North China Political Council. The latter conception, it will be noticed, excludes the two provinces of Suiyuan and Chahar from the so-called five provinces of North China, and northern Shansi, which together with the two provinces previously mentioned, form the region under the administration of the Federated Autonomous Government of Mongolia. There is yet another notion of what North China comprises and that is that it includes the six provinces of Shantung, Hopei, Honan, Shansi, Shensi and Kansu—the region lying north of the mountain ranges of Chinling, Taipashan, Fushowshan and Hiungshen and the old Yellow River.
Such are the divergences of opinion regarding the geographical delineation of North China. Be that as it may, there can be no two opinions regarding the fundamental fact that North China constitutes
the first line of defence for Japan, for that region has close geographical ties with Manchoukuo, Chosen, and Japan Proper which lie contiguous to or across a narrow sea from North China.
A glance at the map will show what countries border North China and Mongolia in other directions. In the north the great territory of communist Outer Mongoria lies menacingly along the whole length of Mongolia, which, therefore, forms a natural anti-Comintern barrier. In the northwest, also, Outer Mongolia lies juxtaposed with the completely bolshevized Hsinkiang Province through the provinces of Shansi, Shensi and Kansu. This chain of territory is at present most important from the Communists' point of view and is popularly called the "blood transfusion" line which renders possible the Comintern's infiltration and machinations in China.
At Yenan in the northern part of Shensi, which is an important strategic point on the Outer Mongolia-Hsinkiang Red Route, there is the communist District Government of Shensi, Kansu and Ningpa. The city constitutes the strategic headquarters of the Chinese Communists for their multifarious activities. It is here that the dangerous waves of anti-Japanism and bolshevization originate. Herein lies one of the most vital and pressing problems, in the light of which Japan must regulate her relations with North China.
Communist Armies in North China and Anti-Communist Measures
From the direction of the Red district in north Shensi Province above referred to, the Chinese Communist armies with three divisions of regulars encroached upon Wutaishan, a Buddhist sanctuary in northeastern Shansi. As early as the spring of 1938 they acquired bases in North China and established a Red government, to which they gave the high-sounding name of the Government of the District of Shansi, Chahar and Hopei. But in fact it is neither a government nor a régime, being nothing more than a den of bandits surreptitiously organized for fear of being suppressed by Japanese punitive forces. Externally it is utterly unimpressive, but the depth of its foundation and the influence it wields can by no means be ignored.
Moving stealthily between intervals of Japanese punitive expeditions, the Communist armies in North China resorted to partizan tactics, appearing and vanishing with superb elusiveness. In this manner they have gradually extended their influence into various
parts of North China. Having infiltrated into the northern parts of Hopei and Shansi, south Hopei and western Shantung, they have carried on their nefarious propaganda and agitation among the ignorant masses in the interior districts, while simultaneously engaging in special political activities. And in their attempts to win over the people and organize them in communistic fashion, the Communist armies have shown a remarkable doggedness of purpose.
As regards the fighting power of the Communist armies, even the Communist regulars who are reputed to be the flower of their forces can in no way be compared with the invincibility of the Japanese army. The Japanese forces, while struggling against heavy odds arising from topographical conditions, climate, food supplies and transportation, have indefatigably carried on their punitive campaigns against the Red armies. As a result the strength of the Communist forces has greatly diminished. But there is no doubt that the most effective weapon which the Communists can wield is their political and ideological agitation as well as economic cajolery among the masses, of whose ignorance and destitution they skilfully take advantage, rather than sheer force of arms. That they have achieved a certain measure of success by these tactics must be frankly admitted.
In this respect the Communist armies are far superior to the old Kuomintang armies which are fast disintegrating. As a matter of fact, the power of the two anti-Japanese forces, namely, the Communist and the old Kuomintang Parties, is on the whole fast crumbling before the onslaught of the Japanese armies. But when these two anti-Japanese armies are compared with each other, the Communist armies are far more vigorous in morale, so much so that the baneful influence exerted by them as the central motive force of anti-Japanism is one that cannot be underestimated.
The Communist Party and the Communist Army are two aspects of a dual organization under a single unified control. It is this peculiar organization that engenders the powerful virus of present-day anti-Japanism. It was these Communists who started the current hostilities between China and Japan; they are the ones who, under instructions from the Comintern, are causing the China Affair to drag on and are still resorting to every means in their power to obstruct the movement for peace and the national salvation of China.
Because of this the Japanese forces regard the Communist armies as their arch-enemy, for whose extermination they have endured much sacrifice in blood and labour. In this campaign of suppressing the Communist forces and restoring order the Japanese have achieved brilliant successes. That all the Chinese régimes friendly
to Japan, from the Provisional Government at Peking to the new Central Government at Nanking under Mr. Wang Chiug-wei [sic], have taken up the anti-Comintern standard as the guiding pinciple [sic] of national reconstruction is also due to such machinations on the part of the Communists. Furthermore, the fact that North China constitutes the most important zone for combatting and extinguishing the power and influence of the Comintern for the safety of East Asia is recognized not only in North China itself, but also in Tokyo and Nanking, proves the stark reality of the Communist menace. Through the establishment of the Hsinmin Hwei as the largest people's organization in North China, the character of which is a civilian counterpart of the Northern China Political Council, and its amalgamation with Pacification Service of the Japanese army, and through the unification of ideological activities, the authorities concerned have been striving to bring about stability and security to the people of North China. This reflects concretely the attitude of the authorities and people of North China toward the Communist encroachment.
In view of the shrewdness of the Communist Party in winning over the people, the mission of the Hsinmin Hwei, which was founded to counteract the menacing activities of the Red elements, must be regarded as very important. When all these circumstances are considered, it will be clear why North China has discarded the Three Principles of the People, including anti-Japanism, pro-Communism and the democratic ideas of the Kuomintang, though these have recently been replaced by the Hsinmin Chui and Hsinmin Hwei which embody the principles of Wang Tao, or the Kingly Way.
Economic Conditions in North China
Another important feature of North China, besides that of defence, is the economic tie that firmly binds this region to Japan and Manchoukuo. The economic relations which Japan and Manchoukuo maintain with North China are closer and hence stronger than that which exist with China as a whole. As already explained, the two countries are not only strongly entrenched in the defence of North China, but they are vitally interested in the development of the resources as well as the trade and commerce of North China. If it were asked what really constitutes the basic policy in the reconstruction of North China, the answer would be that it is imperative to establish as soon as possible a comprehensive national defence system and economy common to Japan, Manchoukuo and North China through their close coordination, and to substantiate
the avowed purpose of national salvation through the exclusion of Communist influence. It is also necessary to establish peace by rehabilitation, and promote the prosperity of the economic life of North China itself by meeting the needs of the people through such organic combination of the three countries and thereby enable the inhabitants of North China to reap the fruits of peace.
In pursuance of this policy Japan established a national-policy corporation, the North China Development Company, having many subsidiary concerns with joint Japanese-Chinese capital investment and has been developing important natural resources such as coal, iron and salt. As an organ of economic control in North China the Japan-China Economic Council was established as a permanent organization, while the North China Liaison Office of the China Affairs Board, with the support and cooperation of the Japanese Army, is now offering positive guidance in the economic affairs of this region.
When economic relations between Japan, Manchoukuo and North China are viewed in terms of trade, it is found that, whereas in the exports from North China the proportion held by Japan and Manchoukuo in 1936, the year before the outbreak of the current China Affair, was 36 per cent, it increased to 41 per cent in 1939, and in imports the proportion was 48 per cent in 1936, but there was an upswing to 62 per cent in 1939.
The most remarkable feature of North of China's [sic] recent foreign trade is that it struck a balance between exports and imports maintained with countries other than Japan and Manchoukuo. As regards North China's trade with Japan, although it was formerly a special market for goods produced in Japan, it has now come to occupy an important place as an exporter to Japan of large quantities of such production materials as coal.
Major Problems of Today
There is still another important factor which attests to the close economic relationship between Japan, Manchoukuo and North China. It is the equalization of the par value of the Federal Reserve Bank notes, the only currency in circulation in North China, to the notes of the Bank of Japan. This system has equalized the Yuan and the Yen, a fact which demonstrates the interdependence of the two countries in the realm of economic affairs.
There are, however, various difficulties confronting the economic progress of North China, such as the development of resources, interchange of materials and goods as well as general trade and the
circulation of currency. Strenuous efforts are, therefore, being made to overcome these obstacles and achieve the desired result. Such difficulties are, when considered from the broad point of view, those which arise primarily from the very trend of the times, when North China stands at a great historic and epochal turning-point with its administration, peace and order as well as its economic life thrown into a maelstrom of change from the old order to the new affecting all phases of national existence.
To illustrate, Powers such as Great Britain, the United States and France, who formerly played important rôles in the development of the resources and foreign trade of North China, now either overtly or covertly oppose or refuse to extend cooperation to North China in its transition. Besides, the fact cannot be ignored that various anti-Japanese elements, manœuvring with the Communist armies as their pivotal force, are obstructing the economic construction of North China whenever opportunity offers. The various difficulties which more or less impede the economic development of North China, viz., the development of natural resources, completion of the system of communications and transportation, the supply of provisions and other goods, the adjustment of commodity prices and the stablilization [sic] of currency, are each partly due to special circumstances in its field, but as a whole they must be considered as inherent difficulties or inevitable concomitants during a period of transition.
As regards commodity prices in North China, the prices at Peking recently increased to as much as 380 per cent compared with the index number of average wholesale prices in 1936. Various organizations on the spot, therefore, are taking every possible step to ameliorate the situation by increasing the import of foodstuffs and other goods not only from Japan but from other countries as well. As a result, conditions have greatly improved, with the prices of food and other articles under proper control and the arrival of commodities in the markets becoming more abundant. The uneasiness which prevailed in February and March this year was thus dispelled completely. With a view to forestalling the recurrence of such disrupting influences in the people's economic life, the authorities on the spot have devised plans for the adjustment of the supply and demand of necessary goods.
Similar measures have been taken in connection with goods other than food. But the most noteworthy measure, of which much is expected, is the rational establishment of organs for the exchange of goods, for which the Liaison Office of the China Affairs Board is now speedily formulating a plan. It is planned to organize separate
association for the importation of different kinds of important articles and thus rationalize the importation of goods from Japan, where low prices prevail, into North China, where prices are comparatively high.
In order to strengthen the Federal Reserve Bank notes and to lower commodity prices to a fixed level, the number of travellers to North China from Japan and Manchoukuo has been drastically cut, the indiscriminate issuance of Federal Reserve Bank notes controlled and new enterprises which are not urgently required restricted, thereby hastening the withdrawal of these notes from circulation. These measures, reinforced by others dealing with the old legal tender, or the fapi, are expected to bring about the desired results in the near future.
Aside from the measures above mentioned, a definite policy has recently been established, under which those who ignore the importance of the national defence and economic construction of North China and attempt to disturb the economic and financial stability in any way, regardless of whether they are Japanese or Chinese, will suffer severe penalties. The Japanese military authorities in China have warned all Japanese now in China, urging them to maintain a serious attitude befitting a nation at war and announcing that those who fail to appreciate the real meaning of the sacred campaign for the renaissance of Asia and conduct themselves in violation of the national policy, will be drastically dealt with. Moreover, on June 11, disciplinary proclamations were issued in the names of the General Headquarters of the Japanese Expeditionary Army in China and the Supreme Command of the Japanese Naval Forces in China Waters, which emphasized the importance of strict maintenance of military discipline for the purpose of successfully concluding the China Affair. In such ways as these the Japanese authorities are devoting their best efforts for the establishment of peace and order, not only in North China, but throughout the areas under their control.