"5. Recognition of Manchukuo. "The adjustment of our relations with Japan and China in view of the balance to be struck at the present moment, should give us occasion to declare our recognition of Manchukuo before Japan's pressure makes itself un~ pleasantly felt. I regard it as impossible that we can any longer delay this recognition, which, after all, now means no more than the confirmation of an existing condition; the official remarks of the Manchurian Government in Hsinking to Councilor KNOLL is the first indication that the recognition must now be effected. Italy's action has, regarding Japan, robbed us of a pretext for further delay and, regarding China, given into our hands a weaken¬ing of Chinese sensitiveness - in case this should yet have to be considered in view of the definite Moscow course of the Hankow-Chungking Government, The cream of the economic possibilities of a recognition of Manchukuo has been skimmed by the economic agreement and the establishing of a commercial agency. The opportunity for an extensive Economic-political transaction with Japan on the occasion of the recognition of Manchuria would have offered itself if the plans discussed by us a few years ago had been followed up. Now the recognition of Manchuria could, in spite of the Italian action, still serve to make Japan a friendly and here certainly appreciated gesture if the occasion should arise (anniversary of the founding of the empire). "6. Conversion to North China. "The recognition of Manchukuo is at least idealistically connected with the further constructive and perhaps most