893.48/6–2247: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received June 23—5:35 a.m.]
1373. Before returning to Shanghai June 22 yesterday, Governor of Central Bank76 called on Minister-Counselor and discussed in general terms Chinese post-UNRRA relief and silver proposals. (Embtels 130177 and 1302,77a June 14, noon and 1 p.m.)
[Page 197]In the course of conversation he volunteered the fact that in the last few days he had two long and frank talks with the Generalissimo; during such he had indicated that situation called for decisive help [action] and greater delegation of authority by Generalissimo. He said he had proposed that for administrative purposes south of the Yangtze should be regarded as area for reconstruction, that military governors should be withdrawn from there and able civilian administrators appointed, and plans made and put into effect for long range as well as immediate developments. The area north of the Yangtze could be considered as area of hostilities and, therefore, military influence would naturally predominate and temporary expedients be applied to meet situations as they developed. Furthermore, army should be regarded as falling into two categories, namely, combat troops who should be better paid and cared for; and defensive or garrison troops who would receive secondary consideration and the provision for whom would fall largely on the provincial authorities. For this as well as other reasons, a much clearer line should be drawn between the revenue raising rights of the Central Govt and the provinces and the tax system itself should be overhauled to produce larger revenue, particularly from the wealthier classes, and expenses cut as drastically as possible.
Dr. Chang Kia-ngau said that in making his recommendations he had pointed out the necessity of Generalissimo using realistically the probability of a long period of hostilities with the Communists. For the first time in any conversation with an Embassy official he was overtly critical of the Generalissimo, for example, both as regards the ability and character of many of his appointed officials and the manner in which he tied them down administratively and bound them directly in loyalty to him personally. Li Ming78 was similarly, though reluctantly, critical to an Embassy officer, saying that if the Generalissimo did not change his ways soon he would lose out. This type of comment, which has sprung up in the past few weeks among high officials, officers (see Embtel 1251, June 10, 5 p.m., third paragraph), and others who were customarily predisposed to praise, is a noteworthy development but it has not reached proportions indicative of decided decline in Generalissimo’s authority. However, growing dissatisfaction of this nature would be a condition precedent to reformatory change.