893.00/6–749: Telegram

The Minister-Counselor of Embassy in China (Clark) to the Secretary of State

Cantel 546. Tung Chi-ling, Vice Minister Economic Affairs, is extremely pessimistic. Personal opinion is situation hopeless. Unless Generalissimo and Li forget differences, pool resources and form some kind of united front, Nationalist Government is doomed.

Economically Nationalist China at present is in complete void, he said. Exports are at virtual standstill with little or no goods moving from interior to coast. If Canton falls, Nationalists will lose last port capable of maintaining any foreign trade. Troops reportedly refusing fight unless paid hard coin.

Tung has little confidence in proposed silver currency program, believing initial issue will disappear through hoarding. He said also [Page 374] government does not have funds maintain silver purchases abroad and that only US loan could finance program envisaged.

Steering conversation back [to] matters economic, Tung could only say that commerce was at standstill and Canton industry in doldrums. Apparently all thinking in government circles is paralyzed by situation and no plans of any kind appear evident. He seemed to derive some satisfaction that Nationalists still control several of richest provinces. On other hand, he deplored Generalissimo’s “last bastion” policy in Taiwan and thought that island should divorce itself from mainland economy.

Lack of funds seems to be principal concern of Chinese Government offices. Tung said his own department was barely able to function or meet payrolls.

Tung certainly spoke frankly when he closed talk by saying: “Since we don’t fight, appear to have no vigor to fight and are divided against ourselves, my opinion is we should quit”.

Sent Department Cantel 546; repeated Nanking 370; Shanghai 316.