The road to the Sino-Japanese war

The Empire-Commonwealth was increasingly threatened by the aggres­sive stance of fascist Italy and nazi Germany in the mid-1930s. Italy launched the invasion into Ethiopia in 1935 and succeeded in con­quering it, and Germany started to remilitarize in 1935 and advanced into the Rhineland in 1936, thus making clearer its determination to bury the Versailles system.

For the British Empire at the present time the main issue is with Germany. There are serious subsidiary issues with Japan and Italy - both arising out of our commitments under the Covenant of the League of Nations. All three countries are, by their systems of Government and by economic need, potential aggressors... We must at all costs avoid the simultaneous antagonism of Germany, Japan and Italy, bearing ever in mind that the moment we become engaged with any of the three, the other two are liable to see the opportunity to realise their ambitions. So long as we keep the peace we hold the balance of power - in our present weakness a precarious balance, but as we grow stronger it may become decisive.²⁹

British foreign policy in the mid-1930s was much influenced by such a consideration, and various attempts were made to avoid confrontation with those so-called 'have-not powers'. The Hoare-Laval plan during the Ethiopian war was the most blatant example of the British appease­ment policy towards Italy, and it should also be noted that after 1936 serious discussion was started about the return of the African colonies to Germany as a means to satisfy its desire for territorial expansion.³⁰ British policy in east Asia should be placed in this international context.

In addition to this desire to lessen the simultaneous threat to the British empire from without, the British policy of accommodation with Japan was buttressed, if not overtly, by the impending fear about the cri­sis within the empire. The disturbances in the West Indies, especially in Jamaica between 1935 and 1938 and the Arab revolt which began in 1936 were the most notable examples. Not that these events directly affected British policymaking on east Asia, but the critical atmosphere in the empire provided a background against which various policies, including those in east Asia, were formulated.

Nearer to the area under discussion, India was also unstable from the British viewpoint. Even if the new India Act of 1935, which was a con­sequence of the Round Table conference mentioned at the beginning of this chapter, was, as is pointed out by Cain and Hopkins, the result of a plan 'for salvaging British finance on a raft of constitutional reform',³¹ it nonetheless contributed very little to assuaging British anxiety about the future of Indian nationalism. One example of the supposed linkage between British policy towards Japan and the situation in India can be seen in a memorandum prepared by the British military (the Joint Planning Sub-Committee) in May 1937:

It appears that the most dangerous economic consequence of the war [with Japan] is likely to be the dislocation of the Indian trade... The total effect of the war - losses, interference with supplies, trade and financial dislocation, unemployment, and increase in prices, is not likely to be such as would seriously affect the war endurance of a White Dominion, but its effect on a very poor population, liable to be exposed to subversive agitation, may be really serious in its polit­ical reactions, and is likely to be turned to full account by agitators.³²

In order to prevent the empire from being weakened both from without and from within, the British government searched for the means of rapprochement with Japan.

Given the important position of China in the wide imperial system of Britain, it was inconceivable that Britain would renounce or reduce its interests in China to satisfy Japan. On the contrary, the British eco­nomic interest in China seems to have increased after the success of Chinese currency reform. Especially after the autumn of 1936 those in the British government who had stakes in east Asia started to have a more sanguine view about the future of British interests in China. Frank Ashton-Gwatkin, an economic expert at the Foreign Office remarked: 'owing to hatred of Japan, Canton is 'pro-British' for the first time in a hundred years'.³³ Cherishing such an optimistic assumption, British policymakers came to adopt a more favourable attitude to Chinese demands for a new railway loan, to which Britain had until then reacted negatively. And Sir Charles Addis of the Hongkong and Shanghai Bank, who had long been involved in British economic and financial relations with China, thought that the realization of the new loan made China effectively 'a member of the sterling area'.³⁴

Under these circumstances, the British appeasement policy towards Japan in the mid-1930s was still being pursued. What the author regards as important at this stage is what can be called 'economic appeasement'. It centred on the proposed abolition of the import quota system in the British empire, which had been laid down in 1934 to counter competi­tion from Japanese goods, especially cotton products. Ashton-Gwatkin, for one, expected that the abolition of the quota system would lead to an improvement in the political relationship between Britain and Japan.³⁵ Such a policy was actually recommended in the report of the Interdepartmental Committee on Trade Policy at the beginning of June 1937, in which it was agreed that: 'the government should inform the Lancashire industry that they desire to see an arrangement made by which the Colonial textile quotas are replaced by a voluntary restriction of Japanese exports'.³⁶

When this quota system was introduced owing to strong pressure from the textile industries, severe criticism was voiced in some colonies, where the poorest classes would be badly hit by the exclusion of cheap Japanese goods.³⁷ Neville Chamberlain himself showed a negative atti­tude towards this policy.³⁸ Since it was not too popular from the outset and resulted in an increase in Japanese textile exports in the markets outside the British colonies, this quota system was easily singled out as a factor, the removal of which would soothe the Japanese discontent and bring 'moderate' pro-British elements in Japan to a more friendly position towards Britain.³⁹

As a matter of fact, in the first half of 1937 there appeared in Japan a tendency that seemed to justify such optimism on the British side.

It seemed that such a change in Japanese attitude, if realized in actual policies, would have opened a way towards Anglo-Japanese co­operation in the manner which British policymakers like Chamberlain desired: a state in which Britain would maintain and even, if conditions permitted, expand its interests in China while securing a friendly rela­tionship with Japan. But the 'Sato diplomacy' had too short a life to be actually tested, and the outbreak of the Sino-Japanese War on 7 July 1937 deprived such a scenario of the prospect of implementation.

On 5 July 1937, the Japanese Ambassador in China, Shigeru Kawagoe, sent a despatch, arguing that, in view of the strong possibility of a new British loan to China, Japan should co-operate with Britain in financial assistance to China. If Japan stood aside and allowed Britain to go ahead alone, 'not only Chinese finance but the whole of China itself would come under British (or international) control', and at the same time, given the international situation, it would be difficult to use force in China to prevent the realization of the loan.

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