893.00/3–848: Telegram

The Ambassador in China (Stuart) to the Secretary of State

432. With reference to reported Soviet offer of mediation in China’s civil war (reEmbtel 369 to Department and Moscow’s 396 of [Page 134] March 1, passed Nanking by Department as 8), local Chinese press reports that March 2 meeting of Political Committee (Cheng Wu Hui) of Executive Yuan categorically denied “news and peace talks which have been circulating”, whereupon the Executive Yuan ordered all provincial and municipal governments to deny rumors of peace negotiations. Despite this action our evidence is conclusive that the subject was broached, however informally, by General Roschin just prior to his departure for USSR in January. We are in agreement with Moscow that such an act is consistent with general Soviet Far Eastern aims (Moscow’s 396 of March 1, repeated Embassy as 8).

If our analysis of current China situation is correct, we incline to believe that from Chinese Government standpoint, Soviet mediation might before long become necessary and even desirable. From American standpoint any Soviet injection into Chinese situation has objections which hardly need elaboration, though we can foresee a possible situation where such a Soviet move might be turned to our advantage.

There is increasing evidence that despite the announced intention of present Government leadership to continue the civil war, strong opposition to this policy by civil and military officials, as well as by the general public, particularly the intellectuals, may soon become sufficiently strong to compel present leadership to abandon this policy in favor of negotiated peace or face the threat of being discarded. It is difficult at the moment to define precisely the scope of this opposition or its strength, but the fact of its existence or of its growth can hardly any longer be denied. The disintegration and decay which has characterized all phases of the Government’s activities during the past several years continues and in recent weeks has been accentuated. It is increasingly apparent that the Government is over extended militarily, with resulting inability to prevent continued economic deterioration and has reached point where its over-all political control is imperiled.

The Government now exerts only a tenuous control over approximately 1 percent of Manchuria and not more than 10 or 15 percent of that part of China proper north of the Yellow River. Between the Yellow River and the Yangtze there are strong Communist elements and there has been infiltration even south of the Yangtze. Government forces are hard pressed and on defensive in practically every theater. There is increased demoralization, a fatalistic feeling that collapse of the Government is inevitable, and a decided trend toward regionalism; each regional leader is looking about for means to defend himself against the Communists when he can no longer call on Nanking.

With this alarming situation there is need for inspired leadership which is not forthcoming. Those in control of the Government seem almost frantic in their search for solution, yet incapable of taking the [Page 135] necessary initiative. Increasingly, it is the Generalissimo who must make the decisions and he continues the slave of his past and unable take drastic measures required. He may be expected, we believe, doggedly to continue the fight with the idea that if worse comes to worst, he can withdraw to Canton where T. V. Soong is engaged in building a stronghold, and let regionalism again prevail.

There is, however, likelihood that opposition with the Government may not permit this course of action. This opposition is well aware of the perils of Soviet mediation, but appears inclined to prefer such mediation to a continuation of current struggle, the only end to which they increasingly fear will be a Communist-dominated China.

Such a negotiated settlement would likely require the disappearance from the political scene of the present dominant leadership, including the Generalissimo. Yet, we cannot rule it out. While present criminally inept and wasteful strategy can postpone temporarily the loss of major strategic points, it cannot do so indefinitely. By far the greater part of the Government’s military and economic resources have been committed to Manchuria and North China. Despite the scale of this commitment it has not forced, and shows no sign of forcing, a decision on the Government’s behalf. Failing American economic aid on an impossibly large scale, failing active American military aid, and failing competent Chinese leadership and planning, there may be revolt within the ranks of the Kmt and acceptance of the Soviet offer to mediate in the forlorn hope that such a compromise would give a breathing spell for regrouping, consolidation, and the emergence of some dynamic quality that would again create the will to victory now lacking. The dangers of coalition with Communists are well known to those in opposition. Most likely accommodation would, therefore, be on a purely territorial basis which would, in effect, be but a temporary, though perhaps prolonged, truce. In any case, we feel it is entirely possible that non-Communist elements released by such event from the dead traditional hand of present leadership, might Tally to American assistance with a complementary possibility of the development of political, economic and spiritual resources, which might eventuate in stable non-Communist Government in central and south China.

In the above sense, it is entirely plausible from a Chinese standpoint that mediation would be desirable as the only alternative to Communist domination of all China. It can also be argued that it could be the lesser of probable evils from an American standpoint. A completely Communist-dominated China would unquestionably be hostile to the US. Some form of settlement, including the abandonment of Manchuria and perhaps part of north China to the Communists, for a period of time at least, could give us a friendly central and [Page 136] south China in whose development and strengthening we could usefully participate and which could, at some future date, serve as a base for the recovery of the rest of China. Without that base we would have no point from which to prevent the Communist tide from flowing across the entire length and breadth of the Asiastic mainland.

Should mediation fail and there develop the return to the regionalism we anticipate, eventual Communist domination of all China would be made easier in that the task could be attacked piecemeal, one regional leader at a time. In this sense a mediated settlement might not necessarily be inimical to American interests.

It seems to us necessary, in any event, to face the fact that we may quite conceivably have a mediated settlement on our hands whether we like it or not. The situation is not yet beyond redemption and if we were to increase our aid to the National Government sufficiently to turn the balance in its favor, despite the bankruptcy of its present leadership, mediation might be avoided. If we do not do so, however, distasteful as it may be it would be folly not to be prepared to exploit mediation to our advantage should it take place.