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The Minister-Counselor of Embassy in China (Clark) to the Director of the Office of Far Eastern Affairs (Butterworth)

No. 1

Dear Walt: You will recall that before leading Washington I promised to write to you periodically on the situation in China as viewed from Nanking, Sending copied to the Consuls offices in China for their background information. This is the first effort along those lines. It is the composite of the efforts of Ludden17 and Schultheis,18 [Page 11] the finishing touches, additions and deletions being my own. Future letters will, I hope, be similarly composed.

We enter upon the new year with statements issued by Chiang Kai-shek,19 the Prime Minister20 and other high Chinese officials all breathing supreme confidence in the future. The actual picture, on the contrary, is most discouraging. Anywhere other than China it would be hopeless. The course of events is still running against us and unless we can change the tide soon it may be too late. As the military situation deteriorates we find an increasing tendency to look anxiously toward the United States for a way out. This is demonstrated by the Chinese request to us for and21 and by the increasing frequency with which individual Chinese come to us suggesting that their only hope is some vague form of American intervention or assistance. They don’t like the Kuomintang; they don’t want to be Communists; yet they don’t know where else to turn. The country is prepared to accept an influx of American advisors should we decide to send them in response to the Chinese request.

Disintegration has been accelerated of late and a tendency toward regionalism has been noticeable. Our concern over the degree to which the process of disintegration has advanced is reflected in our circular telegram of December 3122 to the Consulates at Changchun, Mukden, Peiping, Tientsin, Tsingtao, Hankow and Shanghai in which we recommended that Americans resident in that part of China north of the Yangtze and east of Sian move from the interior to those ports from which their evacuation might be practical.

In spite of the publicly announced new year’s optimism, the character of the current crisis and its gravity is well understood by the Chinese Government. We have reported the realization by the Gimo and other high-ranking officials that the situation is desperate, and we have mentioned the concern of ranking Chinese army officers, both in Nanking and in the field, over the military situation. Similar sentiments, though not so openly stated, are beginning to make their appearance in the press and Chinese in all walks of life are apprehensive of the future.

In actual fact, the deterioration of the military situation continues unabated with the Communists now interdicting river traffic on the Yangtze west of Hankow and the civil war no longer being contained in the North. The Communists’ ability to halt river shipping west of Hankow seems to us most significant. Deprived for any considerable [Page 12] period of Szechwan rice supplies, deterioration of the Government’s military position may be expected to accelerate more sharply than we had anticipated. In the North, in spite of recent minor Government military successes time seems on the side of the Communists and the initiative remains definitely in their hands. The Government forces give the impression of being on an harrassed defensive, incapable of the esprit or leadership necessary to take the offensive.

The Nanking regime continues to lose popular support. Both ordinary people and civil servants are inclined more and more to attribute the ills of the times to bad government and in the North the Communists, through offers of higher pay and better working conditions, are actually luring Government workers from their jobs. Also Peace Preservation Corps seem to be growing in importance in various quarters and there are signs that provincial governors are beginning to mend their political fences in anticipation of the day when, deprived of support of Nanking, they will have to come to terms with or fight the Communists unaided by Nanking.

A budget in reasonable balance which would relieve inflation remains an impossibility so long as revenue is collected in depreciated currency and the Government must continue to finance the civil war. Government efforts to curtail inflation through limiting the issuance of currency may have held down the black market rate in recent weeks, hut this measure has also acted in restraint of trade. The repugnance with which the populace regards the monetary system has not diminished. The tendency for all classes to exchange all surplus cash for commodities persists and drives commodity prices higher. The Government recently has been considering the possibility of reducing the number of persons in civil and military employment while at the same time improving the status of those remaining through increased taxation, but has found that by the time the increased revenue would be collected and available it would be in dollars so depreciated as to effect no improvement in the situation. The Government feels, therefore, that currency stabilization must in reality proceed [precede?] military reform.

In spite of the prevailing and spreading anti-Government feeling there is still no real reason to believe that the mass of the Chinese people are irrevocably committed to the support of anti-Government forces and even now it may not be too late to bring support to a regime having a dynamic program aimed at seeking the support of the agrarian population of any considerable area. Naturally this has all been said before but it is becoming increasingly apparent that it is no longer enough for a Chinese Government to be merely anti-Communist. Positive, inspirational leadership is needed. We can point to the inauguration of the new Constitution, to the holding of elections, [Page 13] and to similar events as milestones toward a stabilized and improved situation, but these events viewed in the context of the over-all situation come too late to deflect the trend toward chaos unless they are accompanied by aid from abroad and progress toward reform at home.

As for the Communists, their propaganda continues to belabor the American “imperialist elements” as warmongers, though by inference it distinguishes between “imperialist” and other elements, presumably better disposed toward them. An American employed by UNRRA recently returned from Communist controlled areas in Hopei, reports that the local populace was well disposed to him as an individual although they deplored his country’s China policy.23 The local leaders told him that when they had completed their conquest of North China—and they are already training administrators for the larger cities there—they anticipated developing at least commercial relations with the United States and that they recognized that American participation in their economic development of North China was essential to its success. This may, of course, be mere propaganda. Time alone will tell.

Before closing I should like to comment briefly on the esteem, or lack of it, in which the United States is held in China in these days. The Government naturally looks to us as its political savior. It is somewhat less grateful for past assistance than would seem warranted and ever eager for whatever future benefits we may bestow. In recent months, however, I believe the Government has become sufficiently aware of its plight that it will accept a reasonable amount of control of its domestic activities as the price of our aid. No one likes to be beholden to another, however, and we will be in for a lot of criticism and some ill-will which will require an exceedingly effective publicity program to overcome.24

Sincerely yours,

Lewis Clark
  1. Raymond P. Ludden, First Secretary of Embassy in China.
  2. Frederic D. Schultheis, Attaché, Embassy in China.
  3. Generalissimo Chiang Kai-shek, President of the National Government of the Republic of China.
  4. General Chang Chun.
  5. For correspondence, see vol. viii , “U.S. Economic Aid to China”.
  6. For text, see ibid. , “Evacuation of Americans from China” (Ch. I), airgram No. A–l, January 2, from the Ambassador in China.
  7. See despatch No. 2, January 3, from the Consul General at Peiping p. 5.
  8. See Mr. Clark’s letter of February 17, 1948, to Mr. Butterworth, Department of State, United States Relations With China (Washington, Government Pointing Office, 1949), p. 901.