Foreign Relations of the United States, 1949, The Far East: China, Volume IX

893.00/7–749: Telegram

The Consul General at Shanghai (Cabot) to the Secretary of State

Shanghai, July 7, 1949—noon.
[Received July 7—5:48 a. m.]

2642. Pattern of recent events Shanghai disquieting. Following telegram originally drafted before outrageous events of yesterday.⁸²

1. There is no law other than that of Communist military authorities. All codes have been abolished.

2. Practice has shown that foreigners have often suffered invasion of their fundamental rights and that there is positive policy of humiliating them. Bredup forced apologize though victim violence. Gould forced apologize for violence even though workers forced way into apartment. In Matheson case Chinese, who was witness to incident, jailed for testifying Matheson struck no blow. In repeated instances workers have physically detained foreigners’ employees though in fairness authorities show increasing disposition intervene in such cases. In repeated instances (Post and Mercury, Andersen-Meyer) workers with official encouragement have refused agree to permit management to close down under any terms. It shows where separation agreed terms have been onerous (Stanvac).

3. I do not believe on basis of information now available to Consulate General that above pattern is part of deliberate plan of Communists. So far, it appears to me part of normal pattern of revolution.

Labor is restive because economic conditions bad and Kmt⁸³ repression ended. Foreigners suffering because wealthy and as result [of being] under Anglophile backwash their former arrogance. Mao Tsetung’s⁸⁴ eight points⁸⁵ probably sincerely intended but Communists want to put foreigners in place, are not prepared to protect foreigners from paying back of old scores and foment violence against them by official propaganda. Whatever Communist intentions, net effect their actions has been to return Americans to situation existing before 1844 Treaty⁸⁶ and incidentally to destroy basis for 1943 Treaty.⁸⁷ Difficulty is that we now have perhaps 2,000 Americans in Communist-held parts of China and substantial investments those areas. Even if Communists have good intentions, positive action their part is required. Though Communists seem to be increasingly aware of problem they have not yet shown firmness necessary to cope with it. In any case they are in a very difficult situation.

4. Although only a few foreigners have actually suffered serious harm, trend is disquieting. I feel that we must very seriously consider dangers ahead for entire foreign community.

5. Most foreign concerns losing heavily on current operations. With blockade⁸⁸ continuing and rice prices (to which wages pegged) rising rapidly, beginning of crisis seems probable in comparatively few weeks as firms exhaust liquid capital or head offices refuse to continue present heavy remittances. Some firms will undoubtedly try to close down; others will seek, if necessary, to abandon operations and local investments; even strongest firms cannot survive indefinitely under present conditions. Foreign utility firms with large local investments, large labor forces, inadequate fuel supplies and crippling rates are particularly vulnerable yet their continued operation essential to other firms.

6. If foreign firms try to close down or are unable to pay their workers at moment of heavy and growing unemployment, a peculiarly nasty situation may well develop. Quite apart from questions of violence and confiscation, there is some fear that when showdown comes foreign nationals may find themselves held here virtually for ransom with approval or acquiescence of Communists’ authorities.

7. I must candidly state that, viewed from Shanghai, I consider decision conveyed by Deptel 775, July 1, 6 p. m. to Nanking⁸⁹ to be disastrous. We have certainly rejected opportunity to place foreign viewpoint and problems before top Communists and to establish some local working contacts which are so needed and so lacking in present ominous situation. We may also have placed those Communists favoring better relations with West in impossible situation and general resentment at our rebuff may aggravate dangerous situation developing here. I can only reiterate my warnings to Department that in our China policy we cannot have it both ways. If we are to pursue a positively antagonistic policy towards Chinese Communists, we have no right to leave Americans and their property in Communist-held China subject to Communist retaliation. Their presence here under such circumstances would almost inevitably lead to more incidents which would further yet acerbate situation. I believe under such circumstances it would be better to get all possible Americans out and, if necessary, to pay them for property lost or abandoned. Such a policy would probably cost less than one year of China aid has cost and prevent arising of secondary issues which would unnecessarily complicate our efforts to solve primary one.

8. Although in absence answer mytel 2572, June 30,⁹⁰ comment is perhaps premature. News items suggest that while refusing to recognize Nationalist blockade of Shanghai, we propose to do nothing which in practice will enable American shipping to resume services to Shanghai. Department will, I am sure, appreciate danger that such attitude may awaken resentment and contempt in both Chinese camps and may lessen effectiveness any representations we may make other subjects. Amid welter propaganda that US is paper tiger, we simply cannot afford let our own actions make us appear weak. On other hand, I do not feel certain that lifting of blockade would in itself alleviate situation sufficiently to reverse trends noted above.

9. Most of realistic factors which we counted upon to keep Communists in line as regards western interests have been nullified by blockade. It is useless to think in terms of the many sanctions we might impose if Communists behave badly when most of them have already been more effectively imposed by blockade. Whereas in long-term view blockade may bring home to Communists importance of links with West, in short-term Communists are likely to think in terms of acute day-to-day problems. They may moreover discover limited means of getting along without West.

10. Difficulties of situation are increased by psychological gap existing between westerners and Communists and lack of contacts to bridge this gap. While westerners here generally are scared to death and display little of their former arrogance and while I am sure Communists generally want westerners to stay and go on with their business, increasing strains of situation are augmenting dangers of major misunderstanding.

I must earnestly suggest Department that it instruct Clubb⁹¹ to ask whether Communist authorities would permit US Government to send commercial ship or planes to Shanghai to evacuate all Americans willing to leave and would permit such Americans to leave. Request could be based on danger existing for all Americans in Shanghai area as exemplified by fact that consular staff was forcibly prevented for over 9 hours from leaving consular premises in heart of city despite repeated appeals to authorities who were well aware of what was going on. Department will recall that numerous Americans were encouraged to remain in Shanghai as a result of Department’s specific instructions and were even promised preference in event of repatriation arrangements. I am hopeful that such a move might at least convince Communists that something must be done to straighten out Shanghai situation although I am somewhat apprehensive about questions Communists face which might be helped by reference to blockade and bombings among dangers.

I must also emphasize to Department that I consider it essential that it have legal means to control all remittances direct and indirect to China. This seems to me only way to control what might develop into a major ransom operation (failure of Communists to promulgate entry and exit regulations is also causing gloomy speculation among foreign communities that they are being held to force recognition or against delivery of Chinese “war criminals”).

11. I feel that there is no use in continuing to hope for the best in our China policy when our previous experience with Communists and cold-blooded analysis must warn us that our hopes may well be unjustified. We hoped for the best in our China aid program and it has ended in disaster. We have now left some rather valuable cards in Communists hands and I am afraid we may deceive ourselves if we think Communists will not use them against us if this suits their purpose. I am also apprehensive that we may become embroiled in a series of petty incidents which awaken emotions in both countries well out of proportion to their intrinsic existence and that this may gravely prejudice at a critical moment what I conceive to be our major purpose in China—so to shape our acts that the future Chinese Government will be responsive to Chinese interests and not subservient to the Kremlin.

Sent Department 2642, repeated Nanking 1464, EmbOff Canton 859, Peiping 192.

Cabot

82. See telegram No. 2628, July 6, 5 p. m., and following, vol. viii, “Problems of United States Consulates in areas occupied by the Chinese Communists”, chapter IV.
83. Kuomintang (Nationalist Party).
84. Chairman of the Central Committee of the Chinese Communist Party (CCP).
85. See telegram No. 1701, May 18, vol. viii, “Political and military situation in China”, chapter IV.
86. Signed July 3, 1844; Hunter Miller, ed., Treaties and Other International Acts of the United States of America (Washington, Government Printing Office, 1934), vol. 4, p. 559.
87. Signed at Washington, January 11, 1943; Department of State, Treaty Series No. 984, or 57 Stat. (pt. 2) 767.
88. For further correspondence regarding closure of certain ports by the Chinese Government, see pp. 1098 ff.
89. Vol. viii, “The Embassy in China after occupation of Nanking by Chinese Communists”, chapter I.
90. Ante, p. 1116.
91. O. Edmund Clubb, Consul General at Peiping.