Office of the Historian

893.5045/2–1448: Telegram

The Consul General at Shanghai (Cabot) to the Secretary of State

Shanghai, February 14, 1948—8 a. m.
[Received February 14—1:14 a. m.]

326. ReContel 189, February 4 (repeated Department as 248) and Embassy telegram 238 to Department February 6. We are endeavoring obtain information to support an estimate of capabilities of Communists and possibilities of serious trouble in Shanghai in early future. On basis of our investigations to date, factors contributing to unlikelihood of such trouble include:

1.
General consensus that Communists have not yet developed their organization, armed strength and concrete plans for action, with assurance of support from other anti-Government elements, to the extent necessary for launching and sustaining overt anti-Government movement.
2.
Absence of large Communist military forces in immediate vicinity of city.
3.
Probability that Communists would not wish reveal extent of their strength and organization until confident of their ability take over city and to do so under circumstances which would not involve major damage of its physical assets.
4.
Indications that active anti-Government student agitation as yet affects relatively small proportion of students and that authorities, through control of Govt funds for help needy students and by threatening to postpone spring reopening of schools until students accept their terms, are in a strong position.
5.
Obvious necessity to Government of holding Shanghai and maintaining its industrial life at all costs.
6.
Strong and intelligent leadership of Mayor Wu.
7.
Believe vigilant (though not too well coordinated) secret police surveillance of Communist activities in labor groups and other local organizations.
8.
Presently favorable factors in economic situation including: Apparently successful weathering of critical New Year period thanks to satisfaction of labor demands for seasonal bonuses and to temporary measures providing loans to industries; relatively prosperous condition of labor so long as employers continue to be able to pay wages approximating cost of living index; momentarily adequate supply of rice and other essential consumer goods; fairly encouraging initial progress toward implementation of new rationing measures; and reasonably successful efforts of economic policy in at least temporarily restraining inflationary trend.
9.
Stimulating psychological and material effect of promised American aid.

On opposite side of picture can be listed:

1.
Discouraging war news from Manchuria and other areas (including reports of small Communist regular forces operating along Nanking-Shanghai section of Yangtze) with its depressive effect on public morale and confidence in Government.
2.
Increasing unpopularity of Government and unquestioned readiness of segment of population to support any anti-Government movement which could demonstrate its capacity to achieve success.
3.
Growing spirit of lawlessness and recent precedents likely to encourage further mob action.
4.
Steady influx of war displaced refugees increasing unemployment, discontent and Communist infiltration.
5.
Military conscription augmenting movement of peasants to city (where conscription demands and methods are less severe than in countryside) and aggravating shortage of farm hands.
6.
Evidence of weakening of unified Government control over labor unions. Former strong-handed CC control of unions is evidently breaking down and, while it is not clear to what extent opposition groups are anti-Government or only anti-CC, resultant disorganization in any case favors Communists, who have advantage of cohesive solidarity.
7.
Strong consensus of testimony from various sources indicating that Communists are steadily increasing strength and organized activities in labor, schools, et cetera, with considerable strength already achieved in department stores, utilities, and textile and tobacco industries. According to estimate of one believed good source, with which Acting Labor Attaché is inclined agree, 30 percent of Shanghai labor is either actually dominated by Communists or sufficiently anti-Kmt to be highly susceptible to Communist influence.
8.
Indications of friction and lack teamwork among law enforcement agencies and Kmt factions (intensified by recent elections).
9.
Possibility that Tu Yueh-sheng and his underground army might turn against Government in a crisis, which would materially reinforce anti-Government elements. (See ConGen’s airgram to Nanking February 740).
10.
Indications that certain well-to-do Chinese highly sensitive to trend lack faith in Government to maintain order to extent that they are arranging residences away from China mainland to which they can flee if outlook becomes more ominous.
11.
Growing disruption of trade communications with hinterland with increasingly serious effect on required supplies from interior.
12.
Increased import quotas and delaying implementation of approved quotas for raw materials and mechanical parts needed for replacements to keep factories operating.
13.
Actual and anticipated shortages resulting from two last mentioned factors which are threatening cause curtailment factory operations and laying off of labor unless shortages can be offset by prompt aid from United States.
14.
Belief of informed circles that current policing methods will not be able to withstand inflationary pressures for long. Not unreasonable to expect another break as fundamental causes of inflation continue unsolved.
15.
Doubted capacity of police and garrison to cope effectively with situation in case Communists staged several large strikes simultaneously.
16.
Believed intention of Communists to stage demonstrations of sufficient frequency and proportions to keep authorities off balance and possibly to deny to Government effective use of this vital city.
17.
Nervousness of authorities and their apparent determination to meet further mob demonstrations with “shoot to kill” tactics which might precipitate major mob action and prematurely force the hand of Communist strategists.

Fact that city has gotten through Chinese New Year period without further trouble is generally considered important as a favorable omen for the immediate future. Nevertheless situation must remain inherently unstable so long as Government continues to suffer military and economic reverses and confidence in Government among its leaders and public is thereby undermined. While on the surf ace situation looks a bit more tranquil, we still feel that it might change with dramatic suddenness depending on any of several unpredictable factors.

Sent Nanking as 239, repeated to Department as 326.

Cabot
  1. Not printed.↩