893.00/9–1749: Telegram
The Consul General at Hong Kong (Rankin) to the Secretary of State
[Received September 19—7:03 a. m.]
709. In September 16 interview with officer of ConGen, Chu Chang-wei stated that Gimo has given orders through Ku Chu-tung for Nationalist forces along Hunan-Kwangtung border to retire to prepared position on outskirts Canton municipality. Since this move would uncover his entire right flank, Pai Chung-hsi protested. Since they believed this move only preparatory onward movement main forces concerned to Taiwan and Hainan, Hsueh Yueh and Yu Han-mou also protested and have informed Li Tsung-jen that they wish [Page 529] cooperate with him in defense South China. Attitude of General Liu An-chi who directly commands best units concerned is unclear, but Li believes that he will also cooperate. If Liu obeys order, Pai will be forced withdraw [to] Kwangsi and Communist take-over Kwang-tung will be greatly facilitated.
Chu also said above act of Gimo, plus his withdrawal air support from Pai, convinces Kwangsi leaders time has approached when they must make overt break with Gimo. They feel that he has deliberate intention sacrifice them in order that he may survive as sole possible repository American aid. Kwangtung leaders also hold similar conviction and now offer Li their political and military support. Both groups now consulting on future moves. Inclined to believe recent activities Gimo Szechuan make it desirable alter earlier plans move government to Chungking when Canton threatened.
Financial factor also likely precipitate break. Government has been largely financed since movement Canton by purchase silver with its foreign currency reserves, which were under control Finance Ministry plus sale 200,000 ounces gold given by Gimo from Taiwan reserve. Foreign currency and proceeds gold sale now exhausted and Gimo unable part with more gold if he is to finance defense Taiwan.
In conclusion, Chu said position South China leaders critically precarious, and if held to be effective, [aid] must be forthcoming immediately. Pai still full of confidence can beat Communists with material aid. With 6 armies which he can recruit in Kwangsi, he will be able retake Nanking.
Interviewing officer expressed sympathies for plight of President Li and promised transmit above data to Department forthwith.
Sent Department, repeated Shanghai 250. Department pass Nanking 49, Peiping unnumbered; pouched Embassy office.