Foreign Relations of the United States, 1948, The Far East: China, Volume VII

893.00/12–3048

The Consul General at Shanghai (Cabot) to the Director of the Office of Far Eastern Affairs (Butterworth)⁸⁷

Shanghai, December 30, 1948.

Dear Walt: I have not written you for some time regarding my views on the unfolding drama here in China, partly because I have been so busy that I have not had time to sit down and sort out my thoughts, and partly because things have changed so fast that any comments would be antediluvian before reaching Washington. The latter comment at least will probably apply to this letter before you get it.

My basic thinking at the present time goes back to the trenchant, rather brash phrase which appeared in a telegram forwarded by the Embassy last May: “Chiang can, must and will go”.⁸⁸ You will recall that ever since my arrival here I have expressed serious doubts whether aid to Brother Chiang could be effective unless, one, his Government secured the confidence of the Chinese people and two, he made the issue of the civil war (Soviet imperialism) clear to them. It is now abundantly clear that he has done neither. He has not only failed to win the people’s confidence, he has forfeited practically whatever confidence they may have still had in him, primarily as a result of the catastrophic currency reform and an unbroken series of military disasters. His propagandists have made a few weak attempts to sell the issue in terms of Soviet imperialism, but the people have refused to buy it; they have no confidence in Chiang’s wares and quite frankly the evidence back of the story is by no means as strong as it might be. Whether aid could ever have been effective, we shall never know, though I doubt it; but today it is generally agreed that only active, large-scale intervention with military forces could save the National Government, and I am sure we would not be prepared for such intervention unless we were already at war with the Soviets.

Today I think therefore that there can be little doubt that Brother Chiang “will” go. Maybe our own elections should give me pause, but local opinion is unanimous in this regard respecting Brother Chiang. The question then is where that leaves us. We might, of course, continue to back Chiang and his cliques, as long as they remain at all in the field. I recognize that there are many sound arguments against abandoning Chiang even if we accept the thesis that we cannot make of him an effective bulwark against Communism in China. For example, I am very apprehensive of the effect of such a step among the nations we are helping in Europe. Nevertheless I think we may as well recognize the universal belief among the Chinese that the Communists are going to have them and that they might just as well relax and enjoy it. We are not going to receive any thanks for continuing our interference. On the contrary, we are going to be accused of prolonging the agony of the civil war and of pursuing imperialistic ends in defiance of the clearly expressed wishes of the Chinese people. In short, I think it would be immoral to foist a rotten, unpopular government on the Chinese people; that it would be worse than a crime, it would be stupid, to pursue our present aid policy. It could not be effective, it could only result in the loss of whatever we were willing to ante up and it might well result in turning against us those Chinese people who like and respect us.

It seems to me very important in this situation to hold our prejudices in rein and to remember certain essential facts. In the first place, if I understand the situation correctly, our intervention has been, so far as the public record is concerned, rather more overt than that of the Russians. Immediately after V–J Day we transported thousands of Nationalist troops through our own facilities to strategic points being surrendered by the Japanese in order that the Nationalists might get to them ahead of the Communists. We kept the Tientsin–Peiping railway open with Marines and placed them in the naval base at Tsingtao, We have given an immense volume of aid to the Nationalists both in economic and military supplies, and practically nothing to the Communists. We have maintained military and navy advisory groups in China—for a long-term program, yes, but it can scarcely be maintained that this has no short-term implications. Finally, we made $125,000,000 available to the Chinese Government to use as it would. On the other hand, the most serious allegation of Russian interference I have heard is that they turned over large quantities of Japanese arms and munitions to the Communists when withdrawing from Manchuria; against this, if I remember rightly, General Marshall has stated that we turned over larger quantities of surrendered Japanese arms and munitions to the Nationalists.

I have already mentioned the manner in which the Nationalist Government has botched the job, yet I feel that I must add that aid was extended to it on the basis of self help and that, despite a few well-intentioned efforts, self help has been notably lacking. The same old inefficient grafters are still occupying the same old positions (with some musical chairs variations); the same old governmental abuses and social injustices still flourish; the same old Generals are making the same old mistakes with the same poor, unwilling conscripts, and the same old traditions of face, squeeze, Oriental indirection, loyalty only to one’s family and all the rest have been rigidly observed. There has been precious little evidence of any patriotism or self sacrifice in the government ranks; and it is thus only natural that the people have denied the government their confidence. General Marshall has borne witness to the manner in which our aid already given has been wasted, our advice disregarded and our best efforts on China’s behalf rendered abortive.

I think it is also fair to point out that the government has pursued a very tortuous and unappreciative course towards the United States. Far from placing the blame where it belongs, the government organs have regularly blamed Nationalist China’s ills on the United States, beginning with oil and scrap for Japan, running through Yalta⁸⁹ and continuing at the moment with querulous claims that our aid is niggardly. If we had any right to aid Nationalist China against the Chinese Communists, it could only be on the basis of defense against Soviet aggression, for otherwise it would be intervention in Chinese internal affairs. Yet Nationalist organs have regularly, ever since I have been here, criticized the United States more severely than they have criticized Soviet Russia. There is, moreover, strong evidence that elements in the government have been responsible for much of the anti-American agitation we have observed, particularly in connection with our policy of rehabilitating Japan. I think this is a fair commentary on the depths to which the Nationalists have fallen.

I do not wish to pass moral strictures on Brother Chiang, or on the Nationalist cliques. They have been confronted with tremendous problems and have been strained beyond their strength. Under less stringent conditions they might have successfully surmounted their difficulties. Brother Chiang is in many ways more estimable than the traditions and the elements that he symbolizes. I simply wish to record a fact. The Nationalists have been confronted by a formidable challenge and they have not been able to meet it. China has become set in so hard a mold that it cannot be reshaped without breaking it—something which Chiang is probably neither willing nor able to do. History is probably going to scratch him off the books in the near future whether we like it or not.

The question is, what we can do about a successor government and what should we do about it? We face many imponderables:

One, we do not know the precise nature of the government we are going to face. For face saving purposes I gather it is likely to be nominally some form of coalition. I think, however, we can safely assume that it will be Communist dominated. For months I have been hoping that our aid program would tide non-Communist China over until Chiang could be replaced by a liberal, popular coalition which could cut the ground out from under the Communists. From the tenor of approaches made to us during the past month by diverse Chinese, I gather that even now there are still elements which believe (or profess to believe) in the possibility of establishing a reformed and revitalized anti-Communist regime, presumably led by Li Tsung-jen and built around a Kwangsi political and military core, which, with American aid, might continue the war with some hope of at least relative success. I do not doubt that such possibilities still exist. I still hope for the emergence of some regime possessing the decent, popular, dynamic qualities which would be indispensable to justify our support; for such a government would at least be in a better position to make peace than Chiang would have now or after his collapse. I would certainly advocate that we refrain from any positive action discouraging efforts to organize such a regime. I feel, however, that the possibilities of its materialization are so extremely small that it would be unwise to commit ourselves to any movement favoring continued opposition to the Communists until it had through actual accomplishment demonstrated that our support was justified. Even assuming the successful formation of a government deserving and winning our support, the best that probably could be expected would be the achievement of somewhat better peace terms; the end result would be much the same—a predominantly Communist government. Barring a miracle, this then is what we must be prepared to accept.

Two, we do not know how a Communist dominated government will act on a short-term or long-term basis respecting American interests. My guess is that on a long-term basis the Communists are likely to try to extirpate all American interests and influences in China. On the other hand, there is considerable evidence suggesting that on a short-term basis they are prepared to accept the continuation of such American interests and activities as may suit their convenience. There is, moreover, considerable logic to this position. We may, then, anticipate a fairly long twilight before the Communists plan to lower the curtain and exclude every ray of light.

Three, and most important of all, we do not know whether and ta what extent the Chinese Communist leaders are more Chinese than Communist. Despite many differences of opinion I have heard expressed since my arrival here, it appears to be generally agreed that among the Communists there are a good many leaders who are one hundred per cent Moscow stooges and a good many others who, although orthodox Communists, are nevertheless thinking in terms of Chinese rather than Soviet interests. Of one thing we can be certain: the vast majority of rank and file Communists think of themselves as Chinese before thinking of themselves as Communists.

Without pretending for one minute to be optimistic regarding the probable course of events, it seems to me that in a coalition government in which the dominant Communists are themselves not the monolithic bloc they are in most European countries, it is possible that skilful maneuvering on our part might yet pull our chestnuts out of the fire. We have by now had enough examples of Communist tactics in taking over countries to know that a hard core of fanatical Moscow stooges, knowing exactly what they want and being utterly unscrupulous in getting it, gradually eliminates all other elements from positions of power. In China, while not wishing to deceive myself or indulge in ill-considered optimism, I think we have a fair chance of thwarting that little game. At any rate, I feel the possibilities of success along these lines are perceptibly better than along the lines of further aid to a discredited government in collapse. I should perhaps make it very clear that I don’t think we should do anything positive to favor a coalition government including Communists but am merely trying to indicate the path of action I favor when nature has taken what I consider its inevitable course.

There are, of course, certain dangers we must avoid. We must not merely aid the Communists through their early difficulties to have them laugh at us when they no longer need us. We must not think of the Communist leaders in terms of appeasement—though we must think of the immense reservoir of good will we have among the common people despite the worst efforts of both Nationalists and Communists. We have learned in Yugoslavia how little gratitude generosity begets in the Communist breast. We must resolutely repress the tendency already observable among ECA heads—as so often among bureaucrats—to think the continuation of their functions essential despite radically changed circumstances. Above all, we must not build up the military strength of potential enemies—after all, our aid program was justified on grounds of military security. Other dangers will suggest themselves to you.

You in Washington are doubtless in the midst of the arguments we have recently been running through here regarding ECA’s famous 3 a), b), c), and d),⁹⁰ and I will therefore not bore you with details. In general, however, I am opposed to the ECA argument in favor of 3a) because, (1) giving the Communists full aid for the first few months would help bridge over the worst period for them and would therefore weaken our bargaining position thereafter; (2) aid to the Communists on less stringent terms than the aid we have been giving the Nationalists would be a strange reversal of policy; (3) it seems to me highly desirable that aid should end, if it is to, on a note of Communist refusal of reasonable American conditions, rather than on a note of mere exhaustion of U. S. funds. In general, I feel that we should continue aid but on pretty strict conditions, that we should string it out over as long a period as possible and that in extending aid we should make a distinction between food and other commodities such as oil and cotton. I also feel that we must hammer the line which I thought was very effectively used by Paul Hoffman (although I had nothing to do with his use of it), that our aid is to help the people, not the government of China, and is directed not against any country or doctrine, but against hunger, poverty, desperation and chaos. I think in that respect ECA’s views are well founded.

With regard to the future, I feel that we could ask for a further appropriation of say $100,000,000 under the exact wording of the provisions of Sec. 402 of the China Aid Act of 1948, although obviously the meaning of this Section would in practice be very different if we gave aid to Communist dominated coalition. I see no reason for changing the language of the Section which after all does express our real purposes in vague but effective language. With such an appropriation as bait, with our strong trading position as a diplomatic asset and with a well conceived propaganda campaign against the more obnoxious Moscow stooges as a stick, I think it is conceivable that we might get somewhere. At least I think it is a better gamble than further aid to the Nationalists and more likely to achieve our purposes than would be a course of washing our hands of the whole Chinese mess and being as nasty as possible.

We must remember the many favorable factors we would have in trying to wean a Chinese coalition government away from the Soviets. First is our trading position. The Chinese Communists are going to need oil, cotton, machinery and many other things the Soviets can’t supply. They are going to need export markets—where again the Soviets can’t offer much. They are not going to want to trade with the Soviets on the basis the latter trade with their European satellites—all take and no give; reports we have from Communist areas, though inconclusive, suggest that the Chinese Commies are already a bit fed up at this Soviet tendency. The Chinese Commies are going to need know-how and technical training and a host of other things that we are in a far better position to supply than the Soviets. They can scarcely afford for a while to let our missionary colleges and hospitals be cut off from America—though I anticipate an early and growing squeeze on them.

No less important a factor favoring a more and more independent course on the part of the Chinese Communists, particularly if we play our cards well, is the whole background against which their rise is being projected. Chinese leaders have seldom had the loyalty to each other and to their country which we expect in the West. Chinese nationalism is very strong, and will, I am convinced, react strongly against Kremlin domination once the latter tries to assert itself—just as Yugoslavia nationalism asserted itself under somewhat similar circumstances. Chinese individualism is pronounced. The Chinese have been for so long accustomed to tyrannical governments that they are unsurpassed at getting around and sabotaging government measures they don’t like, as I have seen plenty of times even in the year I’ve been here. The lack of organization and of cohesion in China is so marked as to indicate it is congenital. Without our help, without American trained technicians, it is doubtful whether the Chinese Communists can run the country—it seems quite possible that their regime would collapse amidst chaos and confusion. Moreover, the intellectual leadership among the Communists must at least at first come largely from American trained men who, although now sympathetic to Communism, are likely to react against any Soviet arrogance or domineering. On the other hand, Soviet Russia has no strong hold over the Chinese Communists once they’re in the saddle—as Tito,⁹¹ they will have come to power largely as a result of their own efforts rather than by imposition of the Soviet armies. Finally, I am confident that most of the present top Communist leaders know in their souls that they’re not 100% satisfactory to the Kremlin. By hammering on the theme that the Kremlin will sooner or later liquidate them one after another—and pointing out every time a case occurs in Europe, which never requires much waiting—I think we might get somewhere.

The suggested $100,000,000 aid program, if voted entirely within the President’s discretion, would, in my opinion, add a strong offensive weapon to our armory. We would presumably distribute it in nondiscriminatory ratio between Nationalist and Communist areas—so long as any of the former remained. All would be economic aid, notably food—none for arms. But in negotiating for an aid program in Communist areas, we would be in a position to say, in effect, “We should like to extend aid in accordance with our traditional friendship for the Chinese people. We have nothing against the adoption of Communism as an economic doctrine by the Chinese people if they so choose. But do you think we are going to extend aid while that Moscow stooge __________ is in a position of authority?” By using our aid program to exert steady pressure on the Communists to get rid of the extreme Kremlin ring while cooperating within limits with any truly Chinese elements, I feel we might get somewhere. Anyhow, it’s a Moscow maneuver which has often succeeded, with less ammunition. Needless to say, the bigger the potential amount of aid, the more pressure we might assert—also the more we might lose and the more we might help the Commies over the worst humps. If the Communists refused to ask for aid on our conditions, even that should be a divisive force among them, and between them and the Chinese people.

Such a course of action, of course, depends for success on pressing Communist exigencies, the inherent nature of things here in China, and above all on the theory that the Chinese Communists are not a monolithic bloc in their subservience to Moscow. I grant you I’m not over-sanguine of success. But what are the alternatives? To continue the present aid to the Nationalists—which can scarcely be effective in the future if it hasn’t been in the past? To give all out aid—which both military and civilian opinion agrees will not save the Nationalist Government and would therefore only bury us the deeper beneath the ruins? To aid promising provincial leaders—but how can we expect, any such leaders to survive against the Communists if the central Government couldn’t? To wash our hands of China—amid catcalls about our alleged friendship for China from both sides, who for once would agree in blaming everything on us? No; if a new government is inevitably going to arise in China no matter what we do, let us marshal our assets to do what we still can to shape the course of events rather than continue to dissipate them in trying to bolster up an obviously bankrupt concern.

Another hopeful factor is the circumstance that the Russians, however clever they are, must before long face the same fundamental dilemma that has plagued us. In respect to what they wish to see done under a Communist dominated Chinese regime, they must either (1) inject themselves into the picture and suffer the consequences in terms of Chinese suspicion and resentment; or (2) refrain from such interfering and thereby risk having their desires disregarded or only incompletely fulfilled. The more they attempt to have their way, the more we shall have opportunity for exploiting Chinese sensibilities and mounting nationalistic sentiment to our advantage. There is a distinct possibility that the Russians will bog down in the same morass into which we are now sinking. The Russians, of course, will meanwhile on their part endeavor to make the most of whatever they may be able to trump up toward discrediting American policies and activities in China in the eyes of the Chinese: “economic imperialism”, profiteering, unscrupulous business ventures, adventurism, collaboration with reactionary elements, personal scandal, division within our own ranks, et cetera. While we cannot hope to nullify such tactics, we can at least do something toward limiting the field for attack offered to the Russians.

A practical aspect of policy which is naturally of great concern to me, though of course of far less overall importance, is the question of the future of American business and missionary work in China. I feel that the Department is now pretty well informed regarding the attitude of business and missionary circles. The business attitude may be summarized as follows:

1. By its extensive aid to Nationalist China the United States has, whether wisely and necessarily or not, stirred up the wrath of the Chinese Communists.

2. Today the Department wants U. S. businessmen to stick to their posts and face the Communists as best they can despite the record in all countries that Soviet Russia has communized of squeezing out foreign business and harrying its representatives, both foreign and native.

3. American business is conducted under our free enterprise system to make a profit. It is not an imperialistic spearhead and does not like on the one hand to be made a whipping boy for domestic politics and on the other to be asked to stick its neck out and suffer losses (contrary to its fundamental motivation) to promote national interests abroad.

4. American business has an important stake in China, but if there is not a reasonable chance for profit in the future, it should pull out—and since its representatives have repeatedly suffered hardships here, they are not inclined to attend a repeat performance.

5. If the U. S. Government expects American business representatives to stay here and face foreseeable dangers, it must assure them of some measure of protection. Living largely in the past, many business representatives would like to see Shanghai re-internationalized, or at least placed temporarily under Marine protection. However, businessmen would face immediate risks with more equanimity if they did not consider the possibility of profitable and stable operations under a Commmunist regime so dim.

6. American businessmen are convinced that they will not be able to carry on under the Communist regime if the United States continues an aid program to elements fighting Communism.

You will appreciate how useless it is to argue that a good many of the American business community’s views are unreasonable and archaic—as so often happens in foreign affairs, that is the way they feel and one simply has to accept the fact. Nor is their attitude wholly unreasonable. They have confronted chaotic business conditions and suffered various losses in the last decade. They do not know whether we will continue to aid the Nationalists and spurn the Commies after the latter occupy this area. They do not even know whether and to what extent they will be permitted by the United States to trade in Communist areas, and to carry on necessary ancillary operations such as financing and insurance. They do not know to what personal indignities, restraints and dangers they may be subjected. They do know what the Communists preach about capitalism, what they practice, and that they have particular reason to hate us in China. I scarcely think that we can claim that they are wholly unreasonable.

With regard to missionary thinking, there is naturally a very different motivation and less of an inclination to argue in such mundane terms. The missionaries have a strong sense of duty and many of them are inclined to stick to their posts as long as they are physically permitted to do so. One of our difficulties in evacuation has been the unwillingness of missionary families to leave the missionaries actually carrying on the work. For the most part, I do not think that missionary activities will be abandoned unless and until the Communists take positive measures to stop them or unless other physical obstacles (for example, inability to transfer funds) make their continuation impossible.

I obviously do not think that the intrinsic business and missionary stakes in China are comparable in importance with the broad national interests which I discussed in the first part of this letter. Nevertheless they are of some importance in themselves and of greater importance as the media both for maintaining and spreading our influences and for upholding our interests in this country. If we accept the thesis that the Chinese Communists are really Moscow marionettes, then we must conclude that American business and missionary activities in China are doomed. The record in other Communist countries is too clear to leave us any illusions on that score.

The point is important because I do not think we should discourage individual American businessmen and missionaries from abandoning acquired positions in China if we feel that they are going to be forced to abandon them shortly and that they will merely go through some unpleasant experiences in the interim. On the other hand, if we feel that the Chinese Communists are not subservient to Moscow—that they are likely to pursue an independent course, then it seems to me that our whole aid program has been a ghastly mistake. If that were the case, our aid program would not only have failed to maintain in power the rotten and unpopular government it favored, not only have unnecessarily jeopardized our entire position in China—we would also have intervened in China’s internal affairs, have blocked much needed and long overdue reforms, and moreover have driven into Moscow’s arms a new government with which we might have enjoyed reasonably normal relations. We simply cannot have it both ways and I am fearful that we are going to end by not having it either way.

If we think only in terms of our own immediate selfish interests rather than in terms of the aspirations and well being of the Chinese people and our traditional friendship for them, we are likely to harm both the Chinese and ourselves. Basic Chinese thinking is not in terms of freedoms which they have never enjoyed and see little if any more prospects of enjoying if the Nationalists win than if the Communists win. Rightly or wrongly in that sector they are thinking in terms of overcoming governmental oppressions in the future as in the past by evasion and passive resistance. What is paramount in their minds is the question of livelihood—of ending the war and the intolerable economic hardship it has imposed and of sweeping out all the multifarious ancient abuses which help keep the masses so desperately poor. The tragedy of China is not that Communism is about to take the country over, evil though we know Communism to be. The tragedy is that, particularly at this crucial moment, China had such a rotten government, which clung stubbornly to power even after it had obviously forfeited the people’s confidence. Thereby those who wanted a change had but one place to go. A naive oversimplification of the problem has led us to uphold the rotten government until disaster has overtaken us—and only you in the Department have prevented the disaster from being worse. Let us not persist further in a course which is to my mind both unwise and immoral. If the Chinese want peace, are prepared to accept Communism, and feel that China will absorb Communism as it has so many conquerors, can we be certain we know better than they what is good for them? My personal conviction is that they want Communism only by preference to the Kuomintang and that our policy should be shaped in every proper way to help the Chinese people but neither of the extremist factions.

I should add in concluding that I realize that my suggestions may be—in fact probably are in certain respects—poison ivy from the domestic political viewpoint. Whether and to what extent it may be possible on this account to implement them, I do not know. I shall leave this baby in your competent hands.

With every good wish for a Happy New Year,

Sincerely,

Jack

87. Received about January 10, 1949.
88. This phrase not found in Embassy telegrams to Department.
89. For the agreement signed at Yalta, February 11, 1945, see Foreign Relations, The Conferences at Malta and Yalta, 1945, p. 984.
90. See telegram Toeca 499, November 26, from the Chief of the ECA China Mission at Shanghai, vol. viii , “U.S. Economic Aid to China” (Ch. IV).
91. Marshal Josip Broz Tito, Yugoslav Premier.