893.00/4–548
The Consul General at Hong Kong (Hopper) to the Ambassador in China (Stuart)79
Sir: I have the honor to submit a report of a conversation on March 18, 1948, between C. Y. Li (Li Tso-hsien) and Vice Consul E. M. Service, concerning the Kmt Revolutionary Committee. C. Y. Li is the general manager of a prosperous firm known as the Hsin Hua Enterprise Company, which maintains branches in Canton and Shanghai. He has been a devoted and close follower of Marshal Li’s80 for a number of years, and Mr. Service was acquainted with him in Kweilin in 1943 and 1944. A few days following Mr. Service’s initial call on Marshal Li on February 28, 1948 (see this office’s despatch of March 1, 194881), Service was contacted by C. Y. Li, who indicated [Page 183] that the Marshal had instructed him to serve as liaison with the Consulate General. This despatch reports the substance of Service’s first interview with C. Y. Li.
Beginning of Summary. The Kmt Revolutionary Committee’s plan of action calls for the staging of a revolt of certain military units behind the Government’s lines. Groundwork for this plan already has been laid, and is continuing. It is anticipated that the revolt of key divisions in all areas below the Yangtze and in the west will render the Generalissimo’s position untenable. The KmtRC will accept political and military leadership and will negotiate for a truce with the Communists, pending the establishment of a coalition government. To carry on its present program of negotiating for the loyalty of divisional commanders and their troops, additional funds are required; an estimated US$10 million will suffice to augment current expenditures until the suitable moment for the coup. Mr. C. Y. Li, a follower of Marshal Li’s, hopes that an American loan in this amount can be made available to Marshal Li, perhaps through a “front” such as Mr. Li’s own firm. It is not yet known whether this proposal actually represents a suggestion from Marshal Li, or is Mr. Li’s own idea.
The KmtRC is working against time to obtain control of the Government before the Communists overwhelm Central China. Marshal Li and his close followers are opposed to the communization of China, and have concrete plans prepared for the introduction of agrarian reforms in accordance with the principles of Sun Yat-sen. Other reforms include the weeding out of fascist elements in the Kmt and sweeping changes in the pay, selection, and supervision of officials. End of Summary.
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Respectfully yours,