§ 7. Mr. LIDDALL
asked the Secretary of State for Foreign Affairs whether he has any statement to make on the present situation in China?
§ Sir S. HOARE
For various reasons the effects upon China of the world economic depression were delayed. For some months past, however, her economic situation has been one of undoubted difficulty and the position has been still further complicated by the recent rise in the price of silver. As the House will be aware, His Majesty's Government have been closely and sympathetically following developments, and they have now arranged that Sir Frederick Leith-Ross, chief economic adviser to His Majesty's Government, should proceed to China at an early date in order that he may be in a position to advise them on the situation.
Despite the financial crisis, the political situation, in recent months, was not unfavourable. There were signs of a steady progress towards order and stability and the success of the Central Government's campaign against the Communists had contributed towards an extension of its authority and influence. In North China, however, there have been disquieting developments during the past two weeks or so. Reports are conflicting in certain details, and the situation is liable to rapid change, but broadly it appears that the local Japanese military authorities made representations regarding persons or organisations alleged to be hostile to themselves in or near the demilitarised zone established between China and Japan by the Tangku armistice. The local Chinese authorities took measures to meet those representations, but certain points remained outstanding and still appear to be the subject of local discussion.
6 In regard to the most recent developments in North China I have been in communication with His Majesty's representatives in Tokyo and Nanking, and through them with the Chinese and Japanese Governments. These communications are still continuing.