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 Some of the letters reproduced in the newspapers were signed the "Blood-and-Iron Group"—or the "Blood-and-Soul Group for the Punishment of Traitors".

Such is the situation at the time of writing this Report. This recrudescence of the boycott activity caused the Japanese Consul-General in Shanghai to lodge a formal protest with the local authorities.

The various boycott movements, and the present one in particular, have seriously affected Sino-Japanese relations, both in a material and in a psychological sense.

As far as the material effects are concerned—that is, the loss of trade—the Chinese have a tendency to under-state them in their desire to present the boycott as rather a moral protest than as an act of economic injury, while the Japanese attach too absolute a value to certain trade statistics. The arguments used in this connection by the two parties are examined in the annexed study already referred to. In that study, also, will be found full particulars of the extent of the damage done to Japanese trade, which has certainly been considerable.

Another aspect of the subject should also be mentioned. The Chinese themselves suffer losses from goods already paid for, not registered with the Boycott Associations, and seized for public auction; from fines paid to the associations for violation of the boycott rules; from revenue not received by the Chinese Maritime Customs, and, generally speaking, from loss of trade. These losses are considerable.

The psychological effect of the boycott on Sino-Japanese relations, although even more difficult to estimate than the material effect, is certainly not less serious, in that it has had a disastrous repercussion on the feelings of large sections of Japanese public opinion towards China. During the visit of the Commission to Japan, both the Tokyo and the Osaka Chambers of Commerce stressed this subject.

The knowledge that Japan is suffering injuries against which she cannot protect herself has exasperated Japanese public opinion. The merchants whom we interviewed at Osaka were inclined to exaggerate certain abuses of boycott methods as racketeering and blackmailing, and to under-estimate or even to deny completely the close relationship between Japan's recent policy towards China and the use of the boycott as a defensive weapon against that policy. On the contrary, instead of regarding the boycott as China's weapon of defence, these Japanese merchants insisted that it was an act of aggression against which the Japanese military measures were a retaliation. Anyway, there is no doubt that the boycott has been amongst the causes which have profoundly embittered the relations between China and Japan in recent years.

There are three controversial issues involved in the policy and methods of the boycott.

The first is the question whether the movement is purely spontaneous, as the Chinese themselves claim, or whether, as the Japanese allege, it is an organised movement imposed upon the people by the Kuomintang by methods which at times amount to terrorism. On this subject much may be said on both sides. On the one hand, it would appear to be impossible for a nation to exhibit the degree of co-operation and sacrifice involved in the maintenance of a boycott over a wide area and for a long period if there did not exist a foundation of strong popular feeling. On the other hand, it has been clearly shown to what extent the Kuomintang, using the mentality and the methods which the Chinese people have inherited from their old guilds and secret societies, has taken control of the recent boycotts, and particularly of the present one. The rules, the discipline, and the sanction used against the "traitors', which form such an essential part of the present boycott, show that, however spontaneous, the movement is certainly strongly organised.