893.00/12–1147
The Consul General at Peiping (Clubb) to the Secretary of State
[Received December 18.]
Sir: I have the honor to enclose, as of possible interest, a memorandum87 of conversation between General Hsiung Shih-hui, who recently came to Peiping in the company of Generalissimo Chiang Kai-shek in relation to current political organization in this area, and myself on December 5, 1947.
It will be noted that the conversation in main turned around the subject of the general political situation in China. General Hsiung dealt with the subject in some detail, with the patent purpose of indicating that the political situation was not really as serious as sometimes viewed by persons not intimately acquainted with the China scene. It will be noted that General Hsiung, even as others, was prepared to contend that all of the Chinese currency in circulation could be purchased for a comparatively small sum of American dollars. In this connection the obvious criticism to be made is that, so far as known, no person excepting a very small number of officials high in the National Government actually knows the total amount of Chinese currency in circulation. General Hsiung himself made another observation that springs to mind at first reflection—that the essence of the problem is actually the National Government’s failure to balance the budget, and not the question of the total amount of currency in circulation.
It will be noted further than General Hsiung indicated his belief that the Chinese military situation was not one basically difficult with which to deal. The factors which would have conditioned General Hsiung’s contention were not expressed by him, but it is to be recalled that the Chief of Staff of the Ministry of National Defense in the spring of the present year predicted categorically that the Communist armies would have been essentially wiped out in the course of six months; but that, in fact, instead of developments having followed the line of his prediction the Communist armies are now active and apparently generally have the initiative in the following areas: Manchuria, North Shensi–Shansi–Hopei–Shantung belt; the Honan–Hupei front from which there seems to be developing a threat to Szechuan; and there is reported to be an increase of unrest in the Kwangtung–Kiangsi–Hunan border region and in South Kwangtung and Hainan Island. It is respectfully submitted that, although General Hsiung did not in the short period of time of our conversation have a real [Page 401] opportunity to set forth his ideas in detail, he seemed on this occasion, as during his tenure in Mukden as Director of the President’s Northeast Headquarters, to give insufficient weight in his thinking to the enormity of the economic problems confronting China at this time.
Respectfully yours,
- Not printed.↩