893.001/3–2849: Telegram
The Ambassador in China (Stuart) to the Secretary of State
[Received March 28—7:28 a. m.]
663. We fear we may have failed emphasize sufficiently remarkable political job accomplished by Li Tsung-jen in few months of his accession to nominal authority. At time of his inauguration he had everything against him. Li succeeded an autocrat who did not resign but merely withdrew from public life—leaving manifestations of his continuing power everywhere. Li inherited an administration of a country in bankruptcy; an armed force, in defeat. The outlook could hardly have been darker. Yet within period of slightly more than 2 months he has won the respect, admiration of majority politically articulate Chinese by his vigorous pursual of things nearest their hearts—peace. He put Communists on defensive in political propaganda field by his unrelenting efforts for peace. He has succeeded in primary objective of his peace offensive—Communist agreement to open formal negotiations. He has ridded himself of despicable Sun Fo and last Generalissimo-appointed Cabinet. He has won his battle to keep Executive, Legislative and Control Yuans in Nanking. He has confirmed loyalty too of Pai Chung-hsi59 and his still intact armies. He has secured the services and consequently support of Ho Ying-chin as his Premier whose authority and prestige among Nationalist generals is second only to Generalissimo’s. With all this Li has avoided break with Generalissimo and secured his assurances, albeit vague, that he will go abroad in due course. All this signifies quiet achievement of position of leadership in China which may prove formidable to opposition either Communist or Generalissimo C–C clique.
Meanwhile economical deterioration had accelerated. Rate of increase in GY60 issue during recent week has been attended by rise velocity. Situation now resembles period last June–July with little likelihood any new “reform” can take hold even if intelligently, comprehensively formulated, of which latter no sign as yet. Impending end ECA61 commodity imports, coupled with Chinese unwillingness or inability to use gold for purchase consumer’s imports, unhappily seems to augur further well-greased economic slide.
Li Tsung-jen is patriotic Chinese who can be counted on to make every effort to develop that part of China under his control into constructive [Page 208] positive force in Far East. He wants to maintain China’s friendly cooperative policy with the West. We believe his present intentions are to resist unreasonable Communist demand in Peiping, hold out for reasonable settlement and if necessary resume armed resistance eventually. His usefulness to cause of world peace as effective instrument for containment of communism in Far East should not be underestimated. For these reasons we have believed that continuation economic support justified at least during negotiation period. If, on other hand, we cannot hold out hopes of maintaining economical aid for next several months on present scale, Li’s position will be seriously jeopardized. In such event we should be prepared for early capitulation his delegates to overwhelming Communist demands at peace table, thus eliminating any prospect of renewed resistance on national scale to Communist encroachment.
Sent Department 663, repeated OffEmb Canton 198, Shanghai 304.