SHANGHAI, 2nd November, 1945



         Whilst the area occupied and/or controlled by the Communist Forces far exceeds that portion of the country to which I shall refer, I confine my comments to areas of which, through residence and travel, I have personal knowledge.


         From South Shantung to the Manchurian border, including Peiping, the country is firmly in the hands of the 8th Route Army. The 3rd Amphibious Corps of the U.S. Marines landed at Tongku late September with orders to "seize and occupy the cities of Chinwangtao, Tongshan, Tientsin and Peiping and to keep communications open between these ports". This they have done but the task of controlling the mines area (Tongshan, Linsi and Kuyeh) and keeping the line open to Chinwangtao is proving difficult from both military and political viewpoints.        The K.M.A. mines are producing approximately 5,000 tons per day as against a normal output of 20,000 tons ― workers living in close proximity to the mines only being available whilst those whose homes are at a distance from the railway are being intimidated and consequently not available for labour. Shortage of pit props, lubricating oil and other stores contribute in no small measure to the difficulties of production with which the K.M.A. are faced. Moreover, with unpleasant regularity the line between Tongshan and Chinwangtao is blown up.


         Tientsin has thus far, on the whole, suffered but little as a result of the world war. The Japanese put up numbers of cotton mills and other manufacturing plants which gave employment to thousands who, by the forced closure of these concerns, are now unemployed. A little forethought could well have avoided much of this unemployment and temporary continuance of operation of these plants by the Japanese under supervision would also have eliminated much of the looting to which the mills have been subjected. Generally, the labouring classes were quite well off throughout the war whilst sedentary workers and merchants, aided by inflation, made a precarious, although frequently fat, living as brokers. This unsound structure is now in a state of collapse. Chungking has delayed too long the arrival of its officials and troops, there is no prospect of prompt revival of real trade, and it is feared that a large section of the local populace may soon be ready recruits for the Communist Party. It was most noticeable that the oft delayed arrival of the Chungking troops was a complete "flop" and their heavy-handed handling of the local lower orders has created a poor impression.


         Financially the situation is chaotic. Late September saw rates of US$1.00=FRB$1.800. and CN$1.00=FRB$4.00 and by mid-October these had slipped to US$1.00=FRB$4.000. and CN$1.00=FRB$6.00.

By October 23rd, however, the FRB$ was appreciating in value and, despite the closure of the Federal Reserve Bank, was quoted at US$1.00=FRB$2.400. and CN$1.00=FRB$2.50. Theories by the dozen are advanced to account for this apparent phenomenon but the fact remains that in the North there is, at this juncture, little or no faith in the CN$ and efforts to establish that currency are meeting with but scanty success. It is, of course, not unlikely that the Communist element is endeavouring to resist the establishment of the Chungking currency added to which the merchants are undoubtedly out to fleece the newly arrived Central Government troops who are paid in CN$.


         Throughout two and a half years in Weihsien Camp, I was in touch with the 8th Route who went so far as to offer to undertake an attack on the Camp and release of internees. The plan was impracticable although the intention good, but throughout the entire period they were most helpful and far from anti-foreign. In Tientsin the U.S.M.C. are experiencing no little difficulty in upholding their somewhat invidious position, i.e. that of holding Tientsin, the railway line, etc., but refraining, from becoming involved in civil war. Motor transports en route to Peiping have been fired on as have trains between Tongshan and Chinwangtao and the 8th Route have intimated to the Marine Corps that the latter should advise the former of troop movements in order to avoid "misunderstandings". Relations between the Marine Corps and Chungking officials in the north are far from happy: the latter being interested largely in the game of grab which naturally brings them into conflict with the American Army of Occupation. British interests are greatly indebted to the assistance granted by the Marine Corps, and in particular to the personal efforts of General W.A. Wharton.


         The situation concerning British ex-internees in Tientsin is temporarily in hand. Those without homes are billeted in H.B.M. Consul General's residence, the late Manchuko Consulate and the Cloisters of All Saints Church. They are being cared for by the Marine Corps who provide food, coal and cooks but are financed out of a grant of FRB$100,000,000 which was obtained from the Japanese Consulate account rehabilitation expenses. These arrangements cannot carry on much longer and there is in consequence urgent need for the establishment of regular relief payments which, on account of the financial position, will be difficult to finance. Many returnees, having viewed the wreck, are now prepared to be repatriated and it is suggested that efforts be made to get them out by the next ship.


         British interests and nationals are under a great debt of gratitude to Mr. O. Joerg, Consul for Switzerland, and his staff, for the untiring work put in by them. Results achieved speak for themselves. Also the internees of Weihsien Camp are sensible and deeply appreciative of the untiring efforts of Mr. V.E. Egger, Swiss Consular Representative at Tsingtao, whose regular visits to the Camp were of great assistance.


SHANGHAI, 22nd November, 1945