893.00/7–649

Memorandum by Dr. Kan Chieh-hou, Personal Representative of the Acting President of China (Li)47

If the Communists are not to be allowed to over-run the whole of Asia, they must be stopped somewhere in the Continent. A line must therefore be drawn over which the Communists are not permitted to go. If we have a line of defense in China which we can hold and must hold against the Communist advance, is it necessary to search for another line further south in either Indo-China or in Burma? The Indo-Chinese and the Burmese cannot make better soldiers than the Chinese. Should the Chinese Communists succeed in taking possession of South China and West China, the repercussions in Indo-China and Burma would be so great that uprisings and guerillas would spread everywhere. Then nothing short of the active participation of American and British forces could cope with the situation.

We have two lines of defense in China, one in the Northwest and the other in the Southwest. The defense line in Northwest China (the line marked “A” on Map I48) runs from Sian along the Lung-hai Railway to Pao-chi and then follows the highway to Han-chung. This line is garrisoned by the Mohammedan troops, estimated at about 150,000 men, by troops formerly belonging to Gen. Fu Tso-yi, about 80,000 men and Gen. Hu Tsung-nan’s men, estimated at about 150,000 men. The fighting quality of both the Mohammedan troops and Fu’s troops is well known. This defense line in Northwest China protects Szechuan, [Page 715]the granary of Western China, and other Northwestern provinces.

The other defense line—in Southwest China—(line “B” on Map I) starts from Changsha, running across the southern part of Kiangsi, and following the border of Kwangtung. This defense line is garrisoned by Gen. Pai Chung-hsi’s 300,000 crack troops, together with a number of provincial army units in Hunan and Kwangtung.

In case we have to give up Changsha, there is an alternate defense line for line “B” on the map. Henyang, instead of Changsha, will be the starting point, but otherwise the line will be quite the same. However, we must be prepared for the worst. If we have to give up Canton, a city situated on flat terrain, the best line of defense would be one running southward from Henyang, with its back on the mountains of Kwangsi, to the southernmost tip of Kwangtung province where the port of Kwangchowan is situated, as indicated in line “C” on Map I. The area behind these two defense lines contains more territory and population than the area which the Chinese held during the War of Resistance against the Japanese aggression 1937–1944. The loss of the the coastal provinces in East China is serious but it is not the loss of the entire[ty] of China. We fought the Japanese with our base in this hinterland and we were able to hold up for many years.

Between the two lines of defense, one in the Northwest and the other in the Southwest, a wide gap seems to be open to the Communists, but geographically speaking, this gap is an impasse. Before the Communist[s] can get into the western provinces, they must break through either one of the two defense lines. They may, however, cross the Yangtze River around Shasi and try to traverse the mountainous regions in Western Honan. Prepared for that eventually, we have a strong cordon of troops on the south bank of the river (line “D” on Map I).

The question now is how we can be sure that these defense lines can be held. It is true that the troops who fought the Communists in Manchuria, in Central China, and along the lower Yangtze did not show a strong will to fight and, when they were defeated, the arms they had received through the military aid program were passed to the hands of the Communists. It must be made clear that those troops were controlled by an exclusive military clique, which, having outlived its usefulness and gone into decay, failed to give them good leadership and fair treatment. This does not apply to the troops now garrisoning the defense lines. They were pushed to the background during the fighting in Manchuria, in North China, in Central China, and along the Yangtze.

Up to now, General Pai Chung-hsi’s troops and the Mohammedan troops have not received any American equipment through the military [Page 716]aid program. Yet General Pai was able to hold the Hupeh province against repeated Communist attacks. The Communists finally gave up further attempts to get into Hupeh. When the Communists crossed the lower Yangtze given up by the disintegrated forces under the control of the said military clique, General Pai’s position in Hupeh became untenable and he had to withdraw his troops to Changsha. A few weeks ago the Communists crossed the Kan River in the Kiangsi province; General Pai’s troops rushed to the scene and drove them back to the other side of the river (see Map II49).

A year ago the Mohammedan troops inflicted severe defeats on the Communists by cutting the rear of a Communist army heading for Szechuan along the Lung-hai Railway. Recently the Communists made a similar attempt and got as far as Wu-feng on the railway. The Mohammedan troops rushed down and drove them back to Sian. (See Map II)

We are paying our soldiers in silver dollars. Payment made in depreciated paper money was one of the main reasons for low morale of the fighting forces. We also need silver to stabilize our currency. If we can pay the farmers with silver dollars for their agricultural products, a political miracle will be performed, because the Communists have no silver and their paper money is depreciating as rapidly as ours. The silver dollars (20,000,000 pieces) now being coined in the mints in this country would be inadequate to meet with the situation. We propose to make use of a part of the ECA fund to purchase silver. We understand that there are about 90,000,000 dollars still unused in that fund. We are ready to discuss methods whereby possibilities of waste or misuse may be eliminated.

  1. Handed by Kan Chieh-hou to the Secretary of State on July 1.
  2. Not printed.
  3. Not printed.