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United States Department of State / Foreign relations of the United States diplomatic papers, 1934. The Far East

The Far Eastern crisis,   pp. 1-348 PDF (131.6 MB)

Page 347

China cannot be accomplished without a solution of China's basic
economic and financial problems, yet efforts of the Government in
this regard continued to be ineffective. Old and new programs for
solution continued to be inadequately implemented, lacking sufficient
capital and technical skill. China's purchasing power decreased; for-
eign trade declined; agricultural conditions became worse, in part be-
cause of widespread floods and droughts; industrialization made little
progress; expenditures for the military continued to be disproportion-
ately large; and unfair and uneconomic taxation continued to burden
the country's economy, notwithstanding the abolition of certain minor
vexatious taxes. The situation was further complicated by the threat
of inflation which arose with the development of a financial crisis in
the last half of the year.
D. China's periphery:
  With Soviet Russia controlling Outer Mongolia and, according to
report, exerting considerable influence in Sinkiang Province and with
the Japanese administering the four northeastern provinces ("Man-
chukuo") and menacing the independence of that part of Inner Mon-
golia remaining to China, the National Government, in accordance
with Chinese practise, handled its relations with the border races
ineptly. Establishing in April an autonomous government in Inner
Mongolia in Chahar and Suiyuan Provinces, it so delayed in imple-
menting the promises made in connection therewith and was so dilatory
in attempting to check Chinese activities repugnant to the Mongols
that whether the National Government could retain the loyalty of the
Mongols was a question. The National Government moved even more
slowly in efforts to regain prestige in Tibet following the death of the
Dalai Lama in December, 1933, the chief measure undertaken during
1934 being the despatch of an emissary supposedly to prepare the way
for the return to Tibet of the Panchen Lama. No competent action
was taken to bring Sinkiang Province under the influence of the Na-
tional Government.
E. Western nations:
  Officials of the National Government continued to be as perverse as
previously in negotiations over questions pending or arising between
China and the United States.
  Chinese realization of the futility of expecting Western nations to
assist substantially in extricating her from her problems was deep-
ened by the preference of the League of Nations for Turkey rather
than China as a non-permanent member of the League Council and
by the failure of the League to return Dr. Paul Rajchman to China,
presumably because he is not liked by Japan, and also by the belief
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