893.002/65: Telegram

The Minister in China (Schurman) to the Secretary of State

451. Entire Cabinet has resigned, although resignation not yet accepted. Action precipitated by Chang Tso-lin who arrived here 13th. From reliable source I learn present plan is to make Liang Shih-yi Prime Minister. His government would represent combination [Page 322] of Chang’s military party with old communications party whose leading members have large investments in commercial and industrial enterprises in China. Program would probably be unification of China and rehabilitation of finances. Latter believed possible through action upon tariff in Washington. Government administration by business men dependent on attitude of Tsao Kun, Wu Pei-fu, Canton and other independent leaders which is still uncertain, but Liang Shih-yi months ago favored peace arrangement with Chen Chiung-ming. Apart from personal motives both Chang and Liang believe present political situation a real danger to China.