893.00 Yunnan/7–1349
The Vice Consul at Kunming (Lutkins) to the Secretary of State
[Received July 27.]
Sir: I have the honor to report concerning a two-hour interview which I had with Governor Lu Han on July 9, 1949, in the course of which the Governor expressed his views on the present situation.
Summary—The Governor was optimistic about the prospects of the Nationalist troops holding South China for a period of at least several months and believed that the Central Government and its military leaders had resolved to resist the Communists to the last. In the event that the Communists over-ran South China, he considered it probable that the Nationalist forces would withdraw westward and continue the struggle from Yunnan, Szechwan, and the North-West. If this proved true, Governor Lu continued, the Provincial Government could do nothing but comply despite its own desire to remain aloof from the fighting and the general opposition of the Yunnanese people to the utilization of the province by the Central Government as an anti-Communist base.
The Governor regarded the National and Provincial troops presently stationed in Yunnan as quite sufficient to deal with the local banditry problem. He minimized the importance of Communist activity in the province, attributing local unrest entirely to the economic distress of the people; the most important factor in this respect, in his opinion, had been the crushing burden of the land tax on the peasantry during the last fifteen years. He explained that excellent pacification results had already been obtained following the abolition by the Provincial Government in March of conscription and the collection of land tax in kind, and that a more equitable land tax system was now being devised.
The Governor quoted figures which showed that the Provincial budget was now seriously out of balance, largely because of high bandit-suppression costs and the necessity for the Provincial Government to advance funds for the upkeep of the Nationalist troops in the province. The budget deficit was temporarily being met by loans from the Yunnan People’s Development Corporation, but it was hoped that the Provincial finances could be satisfactorily adjusted within a few months when the province had been completely pacified, a revised tax structure had been instituted, and the collection of this year’s land tax had commenced.
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Respectfully yours,