Telegram from Walter P. McConaughy, Jr. to Secrertary of State Dean Acheson

chair INCOMING TELEGRAM DEPARTMENT OF STATE-DIVISION OF COMMUNICATIONS AND RECORDS TELEGRAPH BRANCH 2-N-X mon N 841 Action: FE Info: Control 8671 SS G Rec 'd January 21, 1950 DCR 3:11 p.m. FROM: Shanghai TO: Secretary of State ARCHIVES 'NATIONAL RECORDS SERVICE" AND NO: 346, January 21, 8 p.m. Chou Ming-hsun (M. H. Chou) during call made on St. Louis January 19 ostensibly to discuss ECA assets dis posal 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 TELS re initiation present Shanghai ECA assets disposal plan for background re Chou. Chou's approach was briefly as follows: Chen Y1 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 China-first elements will depend militarily upon Chen Y1 and, it is expected, General Liu Po-cheng, who is also anti-Moscow and has closely cooperated with Chen. General Lin Piao would probably be military mainstay of pro-Moscow fac- tion. Attitude of General Yeh Chien-ying 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 DECLASSIFIED E. O. 11652, Sec. 3(E) and S(D) or (E) D.pt. of State letter, TOP anany By NLT- He , NARS Dateg-1076 INFORMATION COPY is GPO 1949-0-849241