793.001/1–2650: Telegram
The Consul General at Shanghai (McConaughy) to the Secretary of State
430. Eyes only for Secretary. ReContel 346 January 21 and Deptel 127 January 25. At request of Chou Ming-hsun transmitted through St. Louis, Chase met Chou evening 24th at St. Louis’ apartment where Chou, aside from discussing ECA matters (separately reported by St. Louis), made approach statements to Chase, in presence St. Louis, summarized as follows:
[Page 297]New regime faces extremely serious situation. KMT for first ten years gave China very good government which maintained effectively stabilized currency and economy. KMT’s fall resulted from economic collapse developing during Japanese invasion and postwar. New regime will similarly fall unless it can stave off economic ruin. Since take-over Shanghai, JMP currency has depreciated fifteen times. Nation’s food situation serious; much distress in interior. New regime must get financial economic help and get it quick. No other way out. Hence Mao’s urgent trip to Moscow and attempts to obtain “5 billion US dollars worth of rubles or dollars or any currency with which to buy imports and bolster economy”. But quid pro quo for such aid must be disastrous political concessions. Appearance Moscow of Chou En-lai with NE and trade economic officials presumably means that Mao and Stalin reached agreement on main terms. If so, Mao may be “finished” when he returns, because Chinese public would never support humiliating concessions to USSR. No matter what Mao may have promised Kremlin, important determinant is people’s attitude, not Mao’s commitments.
Despite propaganda, friendly feeling toward America of Chinese people is deep, widespread, most Chinese realizing that America alone has consistently pursued unselfish policy toward China. This feeling cannot be changed in few months or years. Decades of Japanese occupation of parts of China and Korea with massed Japanese personnel and propaganda failed subdue it. How can Russians suppress it with “few hundred advisors” in short period?
Care taken in Communist press to show that new regime’s seizure of American Government property Peiping involved “barracks alone” and not move against American Consulate General, though attacked by Americans as lie, was significant as indication of authority’s awareness of strength of pro-American sentiment and need for respecting it.
Chinese public is inherently suspicious, hostile toward Russia. Even of Communist leaders and key men, only 30 percent are pro-Moscow; 30 percent are actively opposed to control by Moscow; and balance 40 percent are unprepared to accept it. “In other words, 70 percent are against subservience to Kremlin.” All-out pro-Moscow group is headed by Liu Shao-chi, other leaders including Li Li-san.1 “Mao is not 100 percent pro-Moscow”, while Chou En-lai and Tung Pi-wu2 are among those definitely opposed to Kremlin control.
Political leaders who oppose Moscow domination include Chu Te, Chen Yi, Liu Po-cheng and Nieh Jung-chen (“an important key man”)—all Szechuanese. General Kuo Tze-hua, Chen Yi’s subordinate in control of Tsingtao area Shantung, has also been especially disturbed [Page 298] over economic crisis, trend of events and Soviet penetration Shantung. These and other like-minded Communist military leaders have been organizing since about three months ago a “New China Movement”. It is mostly concentrated in Szechuan and the Chekiang-Kiangsu-Kiangsi-Anbwei region—that is, in Chen Yi’s and Liu Pocheng’s military spheres. (Chou said that Peng Te-Huai3 is also on anti-Soviet side, but that Peng’s hands are tied by fact that all his chief subordinates are Moscow men). As reported, Chou previously described Yeh Ching-ying’s attitude as uncertain, and Lin Piao as pro-Moscow. The New China Movement is basically one of Nationalism, free of Russian or other orientation: “China for Chinese, Russia for Russians, America for Americans”. Movement has already opened office in Hong Kong and is opening another in Manila.
China military situation now reversed. KMT once held lines and points and Communists surrounding intervening areas. Now Communists hold lines and points, and areas are held or threatened by elements which, while not KMT are hostile to pro-Moscow policy and could give most useful support to “New China Movement’s” regular military forces. (St. Louis states that in previous talk Chou indicated he had been and still is officer of guerrilla organization in Tai Hu Region, which, while not pro-Communist, has not yet been resolutely dealt with by Chen Yi because, aside from being strong anti-KMT, it provides independent force which Chen might usefully employ in future.)
Movement looks to possible action some time following Mao’s return after “sell-out” to Moscow. However, such action now stymied by Taiwan factor. Generalissimo’s continued possession of Taiwan, supported by US recognition of Nationalist regime, aside from being great nuisance factor, poses constant threat (sword Damocles) over new regime by leaving ever open possibility of US-backed comeback effort by Generalissimo or henchmen. Until this threat is removed once for all, Communists must hang together and anti-Moscow faction could not think of forcing Moscow control issue to showdown fight. First immediate objective of all Communists, anti as well as pro-Moscow, is to take Taiwan and end with finality all possibility of political comeback by Generalissimo or his “four families”. Chen Yi’s New China group would accordingly welcome, in addition to such indications as President Truman’s recent statement regarding Taiwan, formal withdrawal of American recognition of Nationalist Government.
Current gathering at Shanghai of East China Military and Political Commission members, including General Kuo Tze-hua, provides convenient [Page 299] opportunity for number of new China Movement leaders to discuss “Mao’s visit Moscow” and, Chou seemed to imply, possible action following his return.
Concluding his statement, Chou said that, in light of the considerations he had described, Chen Yi and his group are anxious to set up, before American Government personnel leaves China, some means of contact with American Government.
After listening without substantive comment, Chase said that Chou’s statements seemed susceptible of two interpretations. Either they were in the nature of information and views to be regarded as coming from Chou on Chou’s initiative, or they were meant to represent Chen Yi’s statements conveyed through Chou as Chen’s spokesman. If latter were case, Chase explained (with considerable effort to avoid offense and point out mutually beneficial reasons) that he could not regard statements as coming from Chen or report them to Consul General McConaughy as such unless he first had infallible evidence of Chou’s representative capacity.
Chou replied that he realized such evidence would be requested and asked what sort evidence Chase had in mind. As starter, Chase (choosing the proposal which had my preference among several possibilities which Chase had previously discussed with me) suggested that General Chen, whose military command area includes Shantung, might arrange for the release of two American service men Smith, Bender4 from captivity and their departure from China. Remainder of talk was devoted to discussion of (a) ways in which this might be accomplished and in manner to definitely prove Chen’s hand and Chou’s representative capacity and (b) possible supplemental or alternative means of providing needed proof, including perhaps, if agreeable to Chen, actual meeting between Chen and Chase.
Chou’s response indicated he felt such solution of Smith-Bender case by no means impossible of arrangement. His chief concern seemed directed to (a) embarrassment that might be caused Chen in event of publicity indicating that release of men had been accomplished through personal intervention by Chen at Consult General behest and (b) possible need for assurance that American Government would pay for the two men’s fourteen months’ upkeep expense plus any travel expenses. Chase said it was his personal belief that American Government agencies would do what they could toward limiting publicity if men’s release were pledged and effected, and it was brought in discussion that there would in any case seem to be no reason why public need discover [Page 300] how release was arranged. As to payment of men’s expenses, Chase said this was question for reference to American Naval Authorities. Talk ended with statement by Chou that he would see Chen on points discussed.
Interesting sidelight of discussion was an interjected spontaneous query by Chou whether it would be regarded as proof of his capacity as Chen’s spokesman (which he later admitted would not be proof) if he were to bring about the priority granting by the police of exit visas to any ten Americans whom Consul General might specify. In view of this and previous experiences of SRO, we repeat one thing seems certain: Namely that Chou, whether or not Chen’s authorized spokesman to the extent claimed, possesses powerful backing somewhere, which might be of use to Consul General in event of serious troubles in connection Consulate General’s closure and departure Americans. Believe, however, that this should not blind us to possibility that Chou’s advances could mask ulterior sinister motivation on part of Chen Yi or other Communist quarters, such, for example, as desire involve Consul General in “espionage scandal” or move to uncover American Intelligence system. In latter connection, pertinent to note that, according to St. Louis, Chou has never once indicated that Chen desires set up underground contact in Shanghai or any other point in Communist China, but has always mentioned such places as Manila, Hong Kong, Japan and even continental US.
Even though Chen’s approach may be authentic and nonsinister (as we continue believe probable), there still remains question how serious is his intention of combatting Moscow domination and whether he is primarily interested in that or in getting US withdrawal of recognition of Nationalist Government with view to thereby hastening Nationalist collapse and his bloodless occupation of Taiwan. Our guess is that both factors probably involved.
Suggest that, at least pending ascertainment regarding Chen’s willingness undertake Smith–Bender release, VOA soft-pedal the case.5
Soule and Frankel have been kept fully informed. (Chase).
- Minister of Labor, People’s Republic of China, and member of the Central Committee of the Chinese Communist Party.↩
- Vice Premier, State Administrative Council, People’s Republic of China.↩
- Commander of the First Field Army and Vice Chairman of the People’s Revolutionary Military Council, People’s Republic of China.↩
- Chief Electrician William C. Smith, United States Navy, and Master Sergeant Elmer C. Bender, United States Army, had been detained by Communist Chinese authorities since their disappearance in the Tsingtao area on October 19, 1948. For the text of a statement by Acting Secretary of State Webb, May 19, 1950, on the occasion of their release, see the Department of State Bulletin, May 29, 1950, p. 868.↩
- A marginal note in the source text reads: “Being done.”↩