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

793.00/6–250

Memorandum by Mr. Charlton Ogburn of the Bureau of Far Eastern Affairs

confidential

[Washington,] June 2, 1950.

Remarks on the Situation in China by Consul General McConaughy at the Inter-Departmental Meeting on the Far East

thursday, june 1, 1950, 11:30 a. m., room 5106 new state¹

Mr. McConaughy began by expressing the feeling that no one can be dogmatic about the situation in Shanghai. No easy formula for a solution to the problems the Chinese Communists have presented us with can be offered and all proposals for pat solutions must be regarded with reserve. The Chinese Communists themselves present many baffling contradictions. On the whole their record is exceedingly bad from our point of view. There are, however, some signs that they are not ready for a complete break with us. At times they could have taken more extreme actions against us than they did. Some of their actions could even be considered semi-conciliatory. For example, there was the recent release of the three American fliers, Smith, Bender, and McGovern. No explanation could be offered for their having done so. Moreover, after long delays the Chinese Communists did finally allow the departure of American officials.² Previously they had allowed the Consulate General to keep its radio in operation for ten months although preventing the dispatch of air mail pouches. In these actions the influence of moderate elements in the party could perhaps be detected. Unfortunately, these elements are apparently being eclipsed as Soviet influence in China grows. Three thousand Russians had arrived in Shanghai by the time the Consulate General closed in April. Despite the increasing power of the pro-Moscow faction in the party, some American businessmen had recently been released. It may be that these inconsistencies in Chinese Communist policy are designed to confuse us. In any case it would seem that the Peiping regime is not yet ready to deport all Americans or to attempt to eradicate all American influence. Meanwhile we should try to strengthen the position of American missionaries and businessmen in China. It is to be hoped that we shall not have to withdraw entirely from the country.

Mr. McConaughy explained that there were a number of points he wished to cover and that he would present them individually.

1. The Chinese Communists are acutely sensitive to foreign criticism. This was manifest in their reaction to the broadcasts of the Voice of America for example. Minor inaccuracies in these broadcasts were invariably picked up by them. They tended to admit to the main charges brought against them in the broadcasts but resented small errors and blamed the Consulate General for them. In accordance with the new nationalism the Chinese must always be regarded as right. There was, for example, the case of an English teacher accused of reprimanding a Chinese student for spitting on the floor; those charged with investigating the incident determined that a Chinese could not be guilty of this fault and found that the English teacher herself had been drooling at the time of the alleged occurrence.

2. The Chinese Communists show an exceptionally strong interest in Southeast Asia. In their evident intention to exert domination in the area they are doubtless egged on by the Soviets. Hong Kong, northern Indochina and Burma are all objects of Chinese irredentism. Their propaganda, however, is aimed at the whole area. They clearly hope to use the Chinese merchants in the various Southeast Asian countries as instruments of their policy, apparently believing that they can win over the merchants despite their bourgeois background. From Shanghai it appeared that there had been some response. The merchants were of course influenced by family motives in their willingness to cooperate with the Chinese Communist regime. Regardless of the character of the government in China, remittances by overseas Chinese would continue to be made to dependents at home. Moreover, the overseas Chinese tend to feel that for the first time there is a regime in China which, whatever its shortcomings, can command respect and assert itself.

3. In trade the trend in Communist China is toward monopoly. The Chinese Communists evidently intend to monopolize exports first, then imports. Tung and other vegetable oils, bristles, tea, and tungsten are exports which have so far been brought under government control. This control is exercised to reduce the margin of profit to the point at which business is discouraged and foreign exporters are being frozen out. The trend is not one that we can easily oppose by countermeasures. Imports from China can hardly be embargoed on the grounds of their being subject to government monopoly, but perhaps we could take action based upon the deterioration of the quality of these imports. Certainly the quality of bristles being exported from China has deteriorated. With regard to imports into China, the Chinese Communists are setting up companies to act as official purchasing agents, possibly having in mind the institution of overseas purchasing agents on the pattern of Amtorg. They explicitly wish to eliminate the middleman as a needless expense.

4. Reports of deviationism among the Chinese Communists on the Titoist model should be discounted. No break between Peiping and Moscow is in the offing. There is, however some pulling and hauling below the surface among Chinese officials. For instance, there has been some friction between General Chen Yi and the Political Commissar in the Shanghai area. The question has frequently arisen as to whether Chen Yi might not split off from Peiping and take east China with him. However, while Chen Yi is not as extreme in his views as the Moscow clique, he knows what side his bread is buttered on. He may well be in charge of the campaign against Formosa, a successful outcome of which would enable him to consolidate his position and come to a satisfactory adjustment with Peiping. In any event, the monolithic structure of the party is likely to continue. There is no longer any catering to the minority parties such as the Democratic League and the Kuomintang Revolutionary Committee. These have now been incorporated into the Chinese Communist Party and their leaders have been forced to sign anti-American manifestos.

5. Self-examination, as it is called, is encouraged among the Chinese Communists. While the top officials are of course immune to criticism, middle-rank officials are often attacked in the press and reprimanded or cashiered. The tendency may be to increase the efficiency of the regime. The possibility of the regime’s bogging down in bureaucracy is a counter-tendency. As an example of the proliferation of bureaucratic controls Mr. McConaughy’s own exit permit received the chops of 30 officers in the course of its validation. Although Chinese Communist officials work long hours ungrudgingly for little pay (those inherited from the Kuomintang being less enthusiastic), the bureaucracy already puts a heavy financial burden on the country.

6. The position the intellectuals have taken towards the Chinese Communists is very disappointing. The majority, while perhaps favorable to Marxist theory, are still opposed to Stalinism but make no attempt to use their influence—for example in the schools—to oppose the drift of the regime. They are in fact supine. A minority actively supports the regime and is abetting the takeover of schools by the government. Obviously in some cases self-advancement is a motive. Many of the students who have returned from the United States have defected to the Communists and have become enemies of ours, voicing a real hatred of the United States. Many factors are doubtless involved in their attitude. Among them is probably a deep racial feeling. Some of the Chinese students have perhaps received real or fancied slights while here and been subject to discrimination. Many were perhaps already fellow travelers. However, it is only a minority of the returned students who are virulently hostile toward us. The Chinese Communists readily accept returned students and feel capable through the extensive indoctrination given all classes of winning them over.

7. The decision for us to retain our representation in China for as long as we did was a wise one. As a result we were able to obtain an insight into the structure and objectives of the Peiping regime and the character of individual officials. We were also able to accomplish something in the protection of American citizens. However, the decision to withdraw our officials in April was also a correct one. The situation had become impossible. With Soviet instigation, anti-American acts could certainly be expected to increase. Moreover, with the silencing of its radio our Consulate General in Shanghai was virtually incommunicado and could perform no other useful service.

8. Our missionaries feel that they can hold out in China, their prospects being better than those of foreign businessmen. There is in fact no evidence that the Chinese Communists mean to eradicate religion. On the contrary they profess sympathy for religious freedom. In line with their policy of encouraging the Moslems in the western part of the country and of winning over the Tibetans, they are stressing religious toleration. There have been only scattered instances of mistreatment of missionaries. On the other hand, large churches in Shanghai are now packed during services, very likely as a concomitant of oppression and a sense of crisis. However the new nationalism of the Chinese must be considered, and Chinese pastors in the Christian churches will doubtless have to be pushed to the forefront. It is important for us that the Christian missions remain in China as an evidence of our continuing interest in the country. There is some considerable chance that they may be able to remain owing to the value the Communists attach to the remittances received by the churches and the hospital work and training they conduct.

9. Of the 3,000 Soviets who had arrived in the Shanghai area by April about half were military, consisting for the most part of air force personnel, including the crews and technicians requisite to ground installations. Of the civilians, most were technicians in the fields of engineering, public health, etc. Soviet influence tends to be clandestine. The Russians obviously wish to avoid the limelight. Their quarters are cordoned off from the Chinese public. They avoid a patronizing attitude and evidently wish to be considered as big brothers of the Chinese.

10. Famine in east central and northern China is serious as a result of floods, drought and heavy requisitions of grain by the government. An estimate of the numbers who actually face starvation is, however, impossible to make. Shanghai has suffered an influx of victims of the famine. Those who are able-bodied are put into the work corps while the aged and infirm beg on the streets. With regard to the possibility of relief from the outside, it is obvious that the Chinese Communists will not permit us to provide relief on terms which would possibly be acceptable to us. They have made clear that foodstuffs even if imported for famine relief must pay the usual tax and that foreigners will be allowed no say-so whatsoever with regard to the distribution of such foodstuffs. The summary seizure by the Chinese Communists in March of $17 million worth of ECA supplies which were to have been used in bona fide relief affords an illustration of the Chinese Communist attitude.

In response to a question as to whether a break between Peiping and Moscow or the overthrow of the Peiping regime by internal forces was the more likely to take place, Mr. McConaughy stated that he considered both possibilities highly unlikely. Recently the Chinese Communist ties with the USSR have been strengthened while their regime has continued to consolidate its power in China. In response to a question as to what criteria should govern the Department’s decisions with respect to applications by persons seeking passports to China, Mr. McConaughy stated that he believed we should issue such passports when the applicant proved to have a realistic knowledge of the situation in China and to possess emotional stability.

In response to a question as to how many Americans remain in the Shanghai area, Mr. McConaughy estimated the number as 300, of whom the majority are missionaries.

In response to a question as to whether the Chinese Communists had been successful in stemming inflation, Mr. McConaughy noted that the exchange rate of their currency in Shanghai had initially been 1600 to the dollar, had risen to 42,000 to the dollar, but had now been brought down to 36,000 to the dollar. He added that the Communists believing inflation to have been a major cause of the downfall of the Nationalists, were making extreme efforts to control inflationary trends and that in this endeavor they had the assistance of well-qualified financial experts, both from the Communist and Nationalist camps.

1. The meeting was attended by 22 officials, 14 from the Department of State; two each from the Departments of the Treasury, Agriculture, and Army; one from the Department of Labor; and one from the Bureau of the Budget.
2. All United States diplomatic and consular posts in the People’s Republic of China had been closed by April 1950, and official United States personnel had departed that country in late April and early May. (See the Department of State Bulletin, May 15, 1950, p. 755.)