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

793.00/3–1650: Telegram

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

secret

Shanghai, March 16, 1950—1 p. m.

1110. As we prepare leave Shanghai, ConGen, without attempting comprehensive survey situation submits following by way of our final impression of certain outstanding features meriting attention as highly significant factors conclusively proven by great weight of evidence. As time precludes detailing such evidence, development of points listed is limited to citation few illustrations:

1. Critical near catastrophic economic situation bringing misery to people at accelerating rate. Attested to from all sides, all areas heard—east China provinces (especially Shantung), Peiping, Tientsin, even Szechuan (whence trained agricultural observer, long contact of ConGen reports “food scarce, land unsaleable, taxes oppressive, business stagnant, labor unemployed, widespread misery dissatisfaction”). ConGen’s economic reports have stressed this to extent precluding need further developing theme. Sufficient to observe that Shanghai, which all sources agree is “paradise” compared other ports and areas, faces serious almost desperate situation as result bombing, blockade but even more Communists bleeding of business through impossible tax and bond demands, with resulting ruin economic enterprise, unemployment, etc. Bureau of Commerce and Industry now has over 6,000 applications for closure firms. To cite banks alone, of 180 private banks left, 27 have applied to close and China Bank manager states he expects not more than 30 will be open year from now. Severity of tax and bond demands impressively confirmed to officers of ConGen by numerous personal contacts who aghast at amounts assessed them. That these affect even poorer classes shown by first hand report that pedicab drivers must pay 380,000 JMP (over 10 US dollars) per pedicab per month in taxes and assessments. Reported frequency suicides and attempted “get-aways” to escape pressure substantiated by several known instances. Bond collecting methods creating near state terror, with collectors callous to please and taking line that all must contribute in order raise funds for conquest Taiwan and thus save properties from bombing. Situation countryside reported far worse with forced autumn food levies intolerable severity.

2. Swelling tide of popular discontent hostility toward new regime, which has spread here and apparently throughout country with startling rapidity during past two months and seems destined grow pari passu with economic crisis. Confirmed by mass evidence, with testimony generally agreeing that Shanghai discontent, though great, less developed than most other areas. To illustrate:

(a) Many close Chinese contacts of ConGen who less than year ago approved new regime, now disillusioned, disgusted, only hoping for third world war, revolution or other way out. Many sources report similar change attitude affecting great numbers, including many professors other intellectuals. Students (at least older ones) reported increasingly fed up with parading as “childish horseplay.”

(b) Manifold reports, whose general accuracy substantiated by occasional well vouched evidence and even press admissions reveal increasing frequency throughout interior of suicides, mass arrests and various forms violence such as burning tax offices (to destroy records), rioting, firing upon farmers demonstrating against taxes food levies, and rampant guerrilla banditry. Increasing reports had in many localities actual Communist control confined to city limits with countryside at mercy of bandits guerrillas of uncertain political affiliation. Tax collectors frequently require armed escort.

(c) Two reliably reported instances violence at Shanghai Communist-organized bond drive meeting, one involving beating up of Communist orator.

(d) Well vouched information that at recent meeting East China regime heads (held following failure their efforts to persuade Peking extend Shanghai bond drive time limit), Chen Yi bluntly declared that new regime’s popular support, 20 percent at “liberation”, later 60 percent, now sunk to almost nil.

(e) Persistent pressure by its Communist leaders to persuade a local labor union to record its “gratitude” to Mao and Stalin for treaty was sullenly rejected by workers on grounds “why thank anyone with price of rice where it is?” Various other signs incident reveal hostility or apathy toward Moscow alliance.

(f) Two Chinese sources state that brutal abuses by cadre workers at Wukiang, recently revealed in press only, came to light as result of bold protest by Liu Ya-tzu¹ made on basis information sent him by relative in Wukiang. General belief that hundreds similar cases, having no Liu to champion, never published or righted, though official press tends to hint at situation.

(g) Even among Shanghai labor, Communists firmest support, large section is turning against new regime according many sources.

Despite such signs and constant unconfirmable reports of guerrilla peasant uprisings, more responsible sources agree that nothing approaching real rebellion yet existent and all agree however that, if rebellion once broke, it would rapidly gain wide support. Evidence that Chen Yi and/or other Communist military leaders are in mood for actual putsch remains inconclusive. Two points significant, however: (a) all sources agree that, if and when any Communist leaders defect, Chen likely to be first; (b) variously reported that Shantung troops, which comprise bulk of Chen’s forces and large fraction of Liu Po-cheng’s are becoming restive over disturbing news re desperate Shantung conditions sent them by families. Also persistently reported that Chen’s relations with Liu Shao-chi very strained.

Considerable proportion of those hostile to new regime feel that even return KMT would be relief, if our Chinese contacts can be taken as representative. Noteworthy, however, that large majority state that Generalissimo and four families never should or could return.

3. Almost universal popular expectation, at least in Shanghai area, of third world war in near future, this fact constantly impressed upon us by contacts all types and classes.

4. At least in Shanghai area—a pronounced revival of popular friendly sentiment toward Western democracies, notably America, which strangely appears grow despite air raids, in measure with Communists increasingly bitter anti-American propaganda. This noted by many observers and demonstrated by manifold small but cumulatively significant signs and incidents personally noted by members and contacts of ConGen. Evidence indicated America more popular now than at height American prestige in postwar era. While difficult to analyse, probable reasons appear (a) traditional force of friendship toward America, (b) Communists overplay of propaganda to point where it produces skepticism and revulsion re Moscow orientation, (c) economic misery which public now contrasts with better days of American era, (d) general expectation of third world war and American victory therein, (e) preverse liking for underdog, (f) “absence makes heart grow fonder.” While not a few thoughtful pro-American Chinese wish America would continue use influence to prevent KMT bombing urban centers utilities as senseless contribution to economic chaos benefitting nobody and aggravating public misery, almost none seek hold America responsible for bombing, and surprising proportion actually welcomes raids. (Realize this represents some departure from past tone of ConGen reports, but we feel fully justified in face of clearly proven trend.) Average man on street seems to reason: third war inevitable, will certainly be won by America; will bring us suffering but quicker end our misery; bombing hastens day; “sooner over the better”.

5. New developing phase of basic Communist policy which, apparently reflecting combination of panic over predicament and determination of top Communists to expedite attainment immediate objectives (especially capture Taiwan) as well long range socialization goals come what may, seems chiefly characterized by bulldog tenacity, truculence, indifference human suffering, and ruthless bleeding of private enterprise and property regardless—or perhaps for purpose—their early extinction. Especially evident is their desperate extortion money from every available quarter—including departing American businessmen. Interesting note that virtually all our sources, including bitterest foes of Communists, agree that, in pursuance of their objectives, rank and file Communists definitely possess certain outstanding qualities. Such include: much greater vigor and thoroughness than KMT; general personal incorruptibility (as regards funds and “squeeze”) hitherto unknown in China; extraordinary capacity for hard work; eagerness to learn; Spartan austerity; fervent belief in propaganda fed them re America, etc.; unswerving devotion to party objectives. All sources agree that Communists intensely suspicious of non-Communists whether foreign or Chinese and that this greatly aggravates their problem of finding competent administrative and technical personnel. Most sources further agree that, while top Communists tend to have vision, and ability, such qualities decreasingly evident as pass down to lower ranks. There is also general consensus among those who have observed European situation that, tough as they are, Chinese Communists are to this point milder breed than European version. (Chase, Van Oss²).

McConaughy

1. Writer and poet, member of the Central Committee of the Chinese Communist Party.
2. Hendrik van Oss, Vice Consul at Shanghai.