Foreign Relations of the United States, 1950, East Asia and the Pacific, Volume VI

793.00/1–2150: Telegram

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

top secret

Shanghai , January 21, 1950—8 p. m.

346. Chou Ming-hsun (M. H. Chou) during call made on St. Louis¹ January 19 ostensibly to discuss ECA assets disposal matters, made what seemed to be genuine feeler on behalf General Chen Yi, whose agent Chou has been purporting, with apparent basis, to be. (See ConGen tels² re initiation present Shanghai ECA assets disposal plan for background re Chou.) Chou’s approach was briefly as follows:

Chen Yi is increasingly “fed-up” with Moscow’s influence over new regime. Foresees possibility of split in CCP developing some time following Mao’s return from Moscow, with China-first elements arrayed against pro-Soviet faction. Should such split occur, the Chinafirst elements will depend militarily upon Chen Yi and, it is expected, General Liu Po-cheng,³ who is also anti-Moscow and has closely cooperated with Chen. General Lin Piao⁴ would probably be military mainstay of pro-Moscow faction. Attitude of General Yeh Chienying⁵ still uncertain; might take either side.

Chen feels that he could, even without Liu’s help, hold East China (Shantung to Fukien) against combined other Communist armies for six months before requiring outside aid.

Meanwhile Chen’s political position is not too secure. During his visit Peiping he was severely taken to task on various aspects of his handling Shanghai situation—most of which centered around basic general thesis that he had been too moderate; and he was virtually held prisoner Peiping for over month. He is, however, still designated leader of Chusan–Taiwan liberation campaigns.

For some time Chen and his group have been considering approaching American quarters, and few months ago plan to have Chen or his representative seek talk with MacArthur was actually discussed. In view impending withdrawal from Communist China of American Government personnel, Chen now anxious to complete, before such withdrawal is effected, groundwork for some means maintaining contact with American Government. While Chou was not entirely clear re this point, he indicated that first step contemplated was arranging some code for communicating through commercial facilities to designated person in US.

St. Louis, while listening to these statements, repeatedly pointed out that he was not a proper person for Chou to approach on such matter, and he suggested that Chou approach the ConGen directly through Chase. Chou eventually said that he or more likely Hsieh Hsin-tung (S. T. Hsieh, described in ConGen ECA tels and more recently revealed to us as “Chen Yi’s nephew and most trusted intelligence agent”) might call on Chase shortly.

Next day (20th) Chou again called on St. Louis. Said he and Hsieh had meanwhile ascertained from Chen that Chen would not be averse to discussing matter with ConGen officer through intermediary, but that he wished first consult views of General Su Yu (Chen’s chief military subordinate now in Nanking)⁶ and was accordingly sending Hsieh to Nanking to see Su. (Incidentally, Chou took the occasion to tell St, Louis that Su “is man to keep eye on”; man of wealthy Shantung background, who, by his fearlessness, likeable personality and carefree offer of entire wealth to Communist cause, won friendship of a powerful Communist general in Shantung; spent year and half in Communist military academy; and now enjoys great popularity as well as reputation of being one of best Communist strategists).

Reverting to line of his original approach, Chou told St. Louis that split in Communist ranks on Moscow control issue is actually developing, which may well “crystallize” when Mao returns to Peiping. Chou also made remarks indicating that Chen is interested in knowing whether there might be any disposition on part American Government (a) to provide assistance to Chen in event of open intra-Communist conflict; and (b) to withdraw recognition of Nationalists in Taiwan and to help in getting such Nationalist leaders as Chen Cheng⁷ out of Taiwan picture. (Chou failed to develop this point clearly. Incidentally he revealed that Chen Yi is as bitterly determined as other Communist leaders that Generalissimo and his “four families”⁸ must be completely eliminated from political stage.)

Re Mao, Chou (whose information we believe reflects at least some access to inside Communist circles) said that Mao will probably return to Peiping only when Russians “get good and ready” to let him return; and that Mao is in difficult position. Chou indicated, in harmony with reports received by ConGen from several other good sources (whose details we hope report shortly), that Moscow talks are basically centered around Mao’s efforts to line up Soviet financial economic assistance as opposed to Kremlin’s counter pressure to get Mao first tied up with political commitments affecting China’s sovereignty and resources as prerequisite to Russian economic aid. According to Chou, Mao is seeking (a) financial aid equivalent to 5 billion US dollars, “in addition to” (b) machinery and other capital equipment, and (c) Taiwan invasion equipment (mainly planes), while Russians thus far have only offered 5 billion dollars value for all three categories combined. On political side, Soviet demands include: control of Port Arthur, Dairen, Tsingtao, Chefoo and Haichow; and far-reaching Chinese concessions to “minority groups” (i.e. races including so-called Manchurians who of course are actually nearly all Shantung and Hopei Chinese) “in the five provinces” including presumably Tibet, Sinkiang, Inner Mongolia and Manchuria (where such groups predominate). Comment: this last demand would seem most plausible, most clever and most significant as its acceptance would greatly facilitate complete domination of peripheral China by USSR, which, except in case of Manchurians, would probably become popular “saviour and champion” in eyes of minor races concerned.

(Chou said that Communist split in general follows age lines, with most leaders over 40 taking China-first side and those under 40 tending more to Moscow.) (Han Ming recently confirmed accuracy of this observation.) Chou quoted Chen as stating that, when time came, he would find it relatively easy to weed out from his command, by permanent separation or temporary details to other fields, those key officers who are not loyal to him.

As on previous day, St. Louis reiterated that Consul General rather than he should be recipient of Chou’s statements.

In evaluating Chou’s statements, Consul General feels that three very important points are involved: (1) authenticity of Chen’s approach through Chou; (2) vital importance of approach to American Government if it is genuine; (3) extremely precarious position and vulnerability of ConGen and other American Government personnel in becoming involved in any negotiations or even sustained contact with Chou whether or not approach is genuine.

Both St. Louis and ConGen have strong reason believe that Chou’s approach is genuine. Admittedly Chou seems a hard-boiled operator, with a secret agent political broker background, probably cold-blooded, unscrupulous. He has, however, by his very effective assistance to SRO (stopping their labor troubles overnight, etc.) demonstrated that he must almost certainly have—at least to considerable degree—the confidence and backing of Chen Yi, which he has claimed to have. Moreover, as indicated in Contels 26, January 3⁹ and 99, January 5,¹⁰ evidence that Chan Yi is oriented toward Titoism is by no means confined to assertions by Chou (who by the way was the first unnamed source cited in Contel 26, January 3). While our information from other sources has not yet gone so far as to suggest that Chen has actually reached point of preparing for action, it has provided increasingly strong grounds for belief that Chen is anti-Moscow; that he is ambitious, vigorous, strong-willed and extremely popular; that his political position has been rendered precarious because of reprimands given him while in Peiping (and possibly because of Mao’s fear of Chen’s ambitions and popularity); and that he would be a logical leader for any anti-Moscow movement that might develop.

In view, however, of our dangerous current situation, ConGen feels that such “belief” that Chen’s approach is probably genuine is not enough, and that some infallible proof that Chou is Chen’s authorized spokesman should be required by us as a condition to any cognizance by us of Chou’s approach. Chen can certainly find a way to provide such infallible evidence without undue risk; and we propose to insist upon it when opportunity is presented. In this connection, Chou asserts that General Wedemeyer¹¹ and Admiral Charles Turner Joy¹² were once closely associated with him and would certainly vouch for him. Would appreciate Department’s making urgent inquiries through Army and Navy to verify this. As jog to memories, Chen¹³ is about 57, stocky powerful build, rather ruddy complexion.

ConGen further feels that, even when authenticity of Chen’s approach is established, ConGen should for safety of staff and local Americans generally, divest itself as quickly as possible of all connection with matter and be in a position to advise Chou that further contact with American side should be transferred to Hong Kong. (Upon receiving certain proof of authenticity of Chen’s approach, ConGen could then easily supply password or other means whereby Chen’s representative could identify himself to Hong Kong ConGen or such other quarter as Department might designate.)

Department’s advice is urgently requested.

This telegram prepared in consultation with Soule¹⁴ and Frankel,¹⁵ both of whom fully informed of matter. Chase.

McConaughy

1. George W. St. Louis was an official of the Economic Cooperation Administration in Shanghai.
2. None printed.
3. Mayor of Nanking and Commander of the Second Field Army of the People’s Liberation Army, People’s Republic of China.
4. Commander of the Fourth Field Army and Chairman of the South China Political and Military Council.
5. Mayor of Canton, Governor of Kwangtung Province, Commander and Political Commissar of the Kwangtung Military District.
6. General Su Yu was Chairman of the Nanking Military Control Commission.
7. General Chen Cheng, Chief of Staff of the Chinese Army, had resigned as Governor of Taiwan in December 1949; in March 1950, following the return to the Presidency of Chiang Kai-shek, Chen Cheng became Premier of the Republic of China.
8. Reference is to the Chen, Chiang, Kung, and Soong families.
9. Not printed, but see telegram 6, January 5, 7 p. m. to Peiping, p. 269.
10. Not printed.
11. Lt. Gen. Albert C. Wedemeyer, Commanding General of the United States Sixth Army, had been Special Representative of President Truman in China, July–September 1947; see Foreign Relations, 1947, vol. vii, pp. 635–784.
12. Commander in Chief, U.S. Naval Forces, Far East; Admiral Joy had held naval commands in the China area in 1945–1946.
13. In the source text, the name “Chen” is underlined and a marginal note reads: “Probably Chou[,] Chen Yi is about 51.”
14. Brig. Gen. Robert H. Soule, Military Attaché.
15. Capt. Samuel B. Frankel, Naval Attaché.