893.50/8–2944
The Ambassador in China (Gauss) to the Secretary of State
[Received September 16.]
Sir: I have the honor to enclose copy of a report40 “Brief Notes on the Economic Situation in the North Shensi Communist Base” prepared by Mr. John S. Service, Second Secretary on detail to General Stilwell’s Headquarters, who is now in Yenan, Shensi (seat of the Chinese Communist regime), with the United States Army Observer Section.
Mr. Service reports that the economic situation in the so-called “Shensi–Kansu–Ningsia Border Area” (the principal rear base of the Chinese Communists) is marked by the general improvement that has occurred during the past two years and he finds that this improvement has had a salutary effect on the morale and general stability of this Communist region. He attributes the economic improvements primarily to the production campaign carried out by the Communist authorities and secondarily to the excellent crops of the past two years. He asserts that the blockade maintained about the Communist “Border Area” in recent years compelled the Communists to develop production to a point of self-sufficiency. He notes that propaganda was utilized as a powerful instrument in the production campaign to encourage all classes of the people, including soldiers and officials, to participate.
Mr. Service observes that the Communist production campaign has, among other things, wrought improvement in the diet of the inhabitants with a consequent bettering of health standards, and has brought about the production of cotton for the first time in the region. Mr. Service notes, nevertheless, that the production campaign has not solved all the economic ills of the “Border Region”: There remains a shortage of many types of equipment and technicians, and quality of production has suffered at the expense of quantity.41
[Page 526]Considering the barren and inhospitable nature of the northern Shensi plateau country and the perennial poverty of its inhabitants, there is little room for doubt that the Communists have made a notable contribution to the economic well-being of the people. Indeed, they may perhaps have rendered an even greater contribution by their elimination of banditry—for which the north Shensi country was once renowned. But, of course, as measured by American or other foreign standards, or even the standards of the Wei River Valley of central Shensi, the Communist production program can only be regarded as on a small scale. In all probability, the bountiful crops of the present year, which seem to have been common to all parts of Shensi province, have played a large, if not major, role in the improvement of the livelihood of the north Shensi masses.
Respectfully yours,