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    "ocrText": "MEMORANDUM TO THE PRESIDENT\nFrom: Edwin A. Locke, Jr.\nDecember 18, 1945\nTHE CURRENT SITUATION IN CHINA\nPages\nSummary of Key Thoughts\nA - B\nI.\nAmerica's Opportunity (to Avert Civil\nWar in China and speed Chinese\nReconstruction and Development)\n.......\n1-5\nII.\nObservations on the Economic Situation\n5-14\nSummary of Action Taken\n9-11\nConclusions and Recommendations\n12-14\nIII.\nObservations on the Political Situation\n14-20\nConclusions\n19-20\nIV.\nThe Present \"Breathing Spell\" in China\n20-22\nConclusions\n22\nV.\nSummary of Recommendations\n23-25\n(A)\nSUMMARY OF KEY THOUGHTS\nAmerica now has an opportunity to aid China avert civil war and\nspeed her reconstruction and development.\nWhat China now needs from America in the way of aid is much more\nthan loans and credits, much more than the physical materials of\nreconstruction and development, much more even than good advice.\nThe chief ingredient of American aid to China at this time, if it\nis to be effective in averting civil war, must be \"know how\" which will\nbe of practical help in bringing democracy to China and in assuring\neffective administration.\nWithout far-reaching changes in China's political and economic\ninstitutions and practices, even if the Chinese factions agreed in\nprinciple to work together, this appearance of cooperation could not last\nlong or mean much.\nThrough the presence of American troops to help disarm and\nrepatriate the Japanese, China has been given a breathing spell from\nfull scale civil war. If as a result of our influence and aid she is\nable to use that breathing spell to reform, liberalize, and revitalize\nherself from within, a real basis for national peace and unity can be\nestablished.\nThe problem of China's government leaders is promptly to formulate\nand carry out specific measures which will give China political and\neconomic democracy, and they do not seem to know quite what to do or\nhow to do it.\nFailure to take such action, I believe, accounts for the lack\nof success to date of recent attempts to establish peace between the two\nmajor parties of China.\nTo make the necessary \"know-how\" available to China would not\nimpose any great burden on us.\nWhile I was in China the Chinese Government adopted the most\nadvanced and specific economic program in its recent history and\nestablished a new organization to carry it out. This program aims at\nobjectives which the entire Chinese people can support.\nLeft to its own devices the Chinese will find it exceedingly\ndifficult to carry out this program. The Generalissimo would like to see\nthe American Government send an Economic Advisory Commission to China.\nIn my opinion the United States can properly grant this request.\n(B)\nI recommend that such a mission be sent promptly to help the Chinese\nGovernment develop and put into action policies and programs applicable to\nall parts of China and to which adherents of both parties could give\nsupport.\nA similar approach is needed at once to China's political problems.\nThe Generalissimo has indicated his determination to bring about\nneeded political reforms in China.\nChina needs far-reaching action by the Central Government not\nonly to reform but to transform itself into a government representative\nof the people and working for the true interests of the people.\nI believe that key men of the Chinese Government stand ready to\nmake fundamental policy changes if they are shown how to do it and given\nhelp in doing it by the United States.\nSpecifically, I believe that this government ought to send to\nChina qualified specialists in constitutional law, government and public\nadministration to work with the Chinese Government in bringing democracy\nand sound administration to China. At the same time, Chinese administra-\ntors might come to this country to study practical administration in a\ndemocracy at first hand.\nI feel that it is imperative to discuss fully and frankly with\nRussia and England the nature and purposes of our cooperation with China\nin the economic and political sphere.\nTo my mind it should be made plain to the world that the presence\nof American troops in China to help disarm and repatriate the Japanese is\ngiving China an all important breathing spell from civil war. It should\nbe made plain that we are using this opportunity to aid and encourage the\nadoption by the Chinese Government of economic and political measures\ndesigned to provide an enduring basis for peaceful settlement of the\nstruggle with the Communists, and which will bring a fuller life to the\nChinese people.\nIf we fail to utilize our opportunity, if we confine our practical\ncooperation with China to the military sphere, we are bound to be confronted\nby this dilemma: Either we will become entangled in China's civil war, or\nwhen we get out of China we will leave her hopelessly divided, dangerously\nweak, and an inviting prey for foreign imperialism.\nAs I see it, there is only one way to get off the horns of this\ndilemma. That is to aid the Chinese Government to take immediate economic\nand political measures which can produce political unity before our troops\nleave China.\nDecember 18, 1945\nDear Mr. President:\nWhen I reported to you, immediately upon my return from\nChina, you asked me to put my views on the Chinese situation in\nwriting. This memorandum summarizes my work in China this autumn\nand presents my findings and recommendations for further action.\nIn preparing it, and in the work which led up to it,\nI had the close collaboration of my Economic Advisor, Albert 2.\nCarr. Important contributions were also made by my Special Assistants,\nColonel Harry A. Berk, A.U.S., and Michael E. Lee. All of these men\nwere in China with me, and their help has been invaluable.\nI. AMERICA'S OPPORTUNITY\nChina's immediate future, as I see it, will be decided\nnot only by what China does for herself, but also, and to a large\nextent, by what the United States helps her to do. I should like to\nmake it clear that in my judgment what China needs from America in\nthe way of aid is much more than loans and credits, much more than\nthe physical materials of reconstruction and development, much more\neven than good advice. Above all else China needs help in making the\npolitical and economic changes and improvements which will provide a\nbasis for her peaceful development. The government of China finds\ndifficulty in getting many things done, even when it wants to do them,\nbecause of lack of the quality which America calls \"know-how\". In\norder to progress rapidly toward democracy and rising living standards,\n- 2 -\nChina must have detailed knowledge of what to do and how to do it.\nI strongly feel that the chief ingredient of American aid to China\nat this time ought to be \"know-how\" which will be of practical help\nin changing basic governmental organization and policy and in assuring\neffective administration.\nTo let such aid depend on the achievement of political unity\nby the Chinese would be to put the cart before the horse. There is no\nchance for real unity in China unless she takes constructive action\nwhich will provide a basis for practical cooperation between the\nCentral Government and the Communists. Even if the Chinese factions\nwere to agree in principle to work together, whether through a central\ncouncil representing all parties or through any other means, this\nappearance of cooperation could not last long or mean much without\nfar-reaching changes in China's political and economic institutions\nand practices.\nIt is through helping China make such changes that we can best\ncontribute to her unity and so serve the cause of peace and democracy.\nThrough the presence of American troops sent to China to\nhelp disarm and repatriate the Japanese armies, China has been given\na breathing spell from full-scale civil war. If, as a result of our\ninfluence and aid, she is able to use that breathing spell to reform,\nliberalize and revitalize herself from within, a real basis for\nnational peace and unity can be established.\n- 3 -\nOur influence and aid need to 60 well beyond moral\nencouragement. It is my impression that most of China's leaders\ndesire to correct the conditions which are now tearing the country\napart. Even highly conservative elements prefer liberalization,\nwhich they have long opposed, to the collapse which they anticipate,\nif American troops are withdrawn before internal unity has been\nsecured. I found widespread agreement in principle on the\ndesirability of reform and liberalization. But agreement in\nprinciple, by itself, has little practical meaning. The problem\nof the government leaders is promptly to formulate and carry out\nspecific measures which will give China political and economic\ndemocracy; and they do not seem to know quite what to do or how\nto do it.\nThat is entirely understandable. The Chinese Government\nis inexperienced in the principles and techniques of modern\ndemocratic government. This inexperience, added to bureaucratic\ninertia, makes it exceptionally difficult for the government to\nact swiftly and effectively without help from outside. To a\nlarge extent, China's present unrest grows out of these factors.\nThis then is the essence of America's present opportunity\nin China: The current breathing spell in China gives us time to\nhelp China establish peace, unity and democracy, if we act\nvigorously and at once to give the Chinese government the benefit\n- 4 -\nof American experience. To make the necessary \"know-how\" avail-\nable to China would not impose any great burden on us. Tie have\nalready made a practical beginning. The chief result of my\nrecent mission to China was precisely the application of American\nideas, experience and methods to China's economic problems.\nWhile I was there the Chinese Government adopted the most\nadvanced and liberal and specific economic program in its recent\nhistory, and established a new organization at the highest level\nof the government to carry out the program. This program aims\nat objectives which the entire Chinese people, including the\nCommunists, can support.\nA similar approach is needed at once to China's\npolitical problems. China ought to be helped to put into effect\na practical and specific program of democratic reform and\ndevelopment to which the whole people could rally and with which\nthe Communists could cooperate. I am convinced that such a\nprogram is feasible, and that it could 60 far to ease China's\ninternal stresses and strains, and pave the way for peaceful\nprogress.\nChina is today confronted with a revolutionary situation\nbrought about in part by governmental inertia and inexperience in\nmeeting the legitimate aspirations of the people, in part by the\n- 5 -\ndislocations resulting from a long and terrible war, and in part\nby the effects of prolonged and advanced inflation. The Chinese\ncannot trade or manipulate their way out of that situation.\nPolitical expedients are bound to fail as historically they\nhave always failed under such conditions. The need is for\nfundamental economic and political action, taken voluntarily by\nthe Chinese Government, to remove the main causes of popular\nunrest. Failure to take such action, I believe, accounts for the\nlack of success to date of recent attempts to establish peace\nbetween the two major parties of China.\nOut of our enormous influence in China has come our\npresent unique opportunity to help China act to preserve peace\nand assure progress. I believe the best way of making clear my\nviews as to the specific steps needed to utilize this opportunity\nis through & plain factual statement of what I saw and did in\nChina in carrying out my mission, and the conclusions that I reached\nas to China's economic and political needs.\nII. OBSERVATIONS ON THE ECONOMIC SITUATION\nThis was my third visit to China in the past fifteen months.\nEnroute I stopped at Tokyo, where, as I informed you in my report of\nOctober 19, my information on China's economic position was further\n- 6 -\nsupplemented by material made available to me from Japanese sources,\nthrough the generous cooperation of General MacArthur. Thereafter,\nI visited Chungking, Canton, Formosa, Shanghai, Hankow, Tsingtao,\nTientsin and Peiping and observed economic conditions at firsthand.\nIn accordance with your instructions, I did not go into Communist-\nheld territory and I was unable to visit Manchuria because of the\nmilitary situation; but what I have seen with my own eyes, added to\nextensive data accumulated during the last year and a half in\nWashington, has, I believe, given me a clear picture of the Chinese\neconomy as a whole.\nOf the many troubles and difficulties which now beset the\nChinese economy, there are four which, in my judgment, are of crucial\nimportance. The key to China's economic future lies in the action\nor inaction of the Chinese Government with respect to:\n1. Shortage of transportation. China has no real trans-\nportation system in the modern sense. Under present conditions,\nwith Communist and guerrilla troops cutting key railroads,\nespecially in the North, and with a shortage of rails and rail-\nroad ties for repairs, China's railroads are more than ever\ninadequate. Her air transportation is a minor economic factor.\nMeagerness of existing river transportation and highway trucking\nfacilities have caused fuel and food distribution to fall below\nthe danger point in many areas. Primarily as a result of the\n- 7 -\ntransportation shortage, great cities like Canton and Hankow\nare now burning wood in place of coal in a desperate effort\nto keep their power plants running for just a few hours per\nday, and the people of these and other cities face the prospect\nof a coal-less winter.\n2. Inadequate food production. Agricultural production\nis dangerously near bare subsistence levels for the Chinese\npeople. Yields per acre and per farm family are wretchedly\nlow. There is no margin of safety. A spell of bad weather\ncan be a major catastrophe. In some areas shortage of\nfertilizers is now imperiling crops, while lack of insecti-\ncides makes plant diseases a constant threat. Bad agricultural\npractices are prevalent, resulting in part from ignorance of\nmodern farming techniques, and in part from the difficult\neconomic conditions -- the excessive rents, taxes, and interest\nrates -- under which most of China's immense farm population works.\n3. Idle Factories. As Generalissimo Chiang Kai-shek told\nthe Chinese people on November 26, most of China's industries\nare at a standstill. Businessmen and industrialists are unwilling\nto make commitments because of the uncertainties brought on by\nmonetary inflation and financial instability. A large number of\nindustrial workers are without employment. In Shanghai three\nworkers out of four are idle. Manufactured goods such as textiles,\n- 8 -\nare becoming increasingly scarce and costly. Difficulties\nin the way of getting industries back into early operation\nare enormous. Not only does the shortage of power and\nfuel constitute a major handicap but, in addition, the country\nis short of trained managers, technicians and skilled workers\nto replace Japanese personnel which operated most of China's\nfactories during the war. The extensive and painstaking\nremoval by the Japanese of industrial machinery and equip-\nment from West and South China have further dislocated the\nChinese industrial economy.\n4. Bad social conditions. The social foundations of\nthe Chinese economy, never strong, have been further\nweakened during the Japanese occupation . especially sani-\ntation, medical facilities, and education. The physical\ndestruction of factories and houses by bombing and the fact\nthat, aside from Japanese-owned industries, there has been\nvirtually no new construction for eight years have produced a\nserious shortage of buildings of all kinds, becoming even\nmore acute as vast numbers of refugees straggle back from the\nhinterland to their urban homes. In some cities, as in\nCanton, Chinese by the thousands are sleeping in the streets\ndespite the onset of cold weather,\n- 9 -\nViewed in proper perspective, these economic 111s are no\nworse than might be expected after eight years of war in an under-\ndeveloped country. In my judgment, a soundly conceived, systematic\nand energetic attack could yield quick results for China in increasing\nagricultural and industrial production and distribution, in overcoming\ninflation, and in improving mass conditions of life. China's chief\nneed just now is for the governmental will and know-how to overcome\nher economic problems. My main conclusion from what I saw of China\nis that she needs strong economic action, aimed squarely at a rise\nin the mass living standards of the people; and that such action,\nif coupled with sound democratic political reform and development,\nwould offer real promise of internal peace and unity.\nBut I also concluded that the Chinese Government needs\nhelp and inspiration if it is to provide the nation with the\nleadership essential to constructive action. Accordingly, in my\ncapacity as Economic Advisor to the Chinese Government, I recommended\nto Generalissimo Chiang Kai-shek that a definite program of action\nbe developed at once, designed to meet the actual economic needs\nof the people. As I cabled you on November 24, he accepted this\nrecommendation, and at his request I aided him in preparing the\nactual program.\nAnnounced by the Generalissimo personally on November 26,\nthe new economic program calls for immediate action to strengthen\n- 10 -\nChinese transportation. As one phase of this activity, it puts into\nmotion a national road building program employing Japanese prisoners,\npending their repatriation. It provides for far-reaching social and\neconomic improvements benefiting China's agricultural masses, as\nwell as for increased use of fertilizers, insecticides, and improved\nseed and free instruction of farmers in modern agricultural methods.\nIt lays down the economic actions essential to early industrial\nrevival and development, as well as expansion of China's foreign trade,\nsuch as removal of wartime restrictions, recruitment of qualified\nindustrial managers, technicians and skilled workers, importation\nof essential machinery and equipment, and stabilization of Chinese\ncurrency. It puts emphasis on the need to improve standards of\nhousing, health, and free public education as a social base for\nfurther economic development. Finally, it opens the way for an\norganized and unified program of government encouragement and\nassistance to projects most useful to China's economic development\nover the next five years, with special emphasis on the harnessing\nof China's great rivers.\nIn announcing this program, the Generalissimo showed that he\nwas interested above all in getting results. As to method, he appears\nto be thinking in terms not of a nationalized economy, but rather of\nvigorous governmental economic leadership and cooperation with the\nfarmers, workers and industrial managers of China. The Central\nGovernment does not propose to assume detailed administration of the\n- 11 -\nnation's economic life, he stated plainly. Instead, its aim is to\ndo everything possible to assure the well-being of private enter-\nprise under honest and effective local government. Provincial,\ndistrict and city officials, he announced, must assume direct\nresponsibility for leadership in the economic reconstruction and\ndevelopment in their own areas. The Generalissimo also made it\nplain that China must not rely entirely on foreign aid to achieve\nher economic goals but must help herself.\nAt the same time that I recommended this program to the\nGeneralissimo, I also recommended the creation by the Chinese\nGovernment of a Supreme Economic Council to lay down broad economic\npolicy and coordinate the economic activities of all departments\nof the government. The Generalissimo, who had already been thinking\nalong similar lines, accepted this recommendation and invited my\ncollaboration in preparing the necessary organic law.\nThe Supreme Economic Council was established on November 26\nto function under the general direction of the President of the\nRepublic. I believe it is unique among the organs of the Chinese\nGovernment in that its avowed goal is \"a substantial and steady rise\nin the mass living standards of the people.\" To attain this objec-\ntive, it will \"direct and assist the early, sound and vigorous\neconomic reconstruction and development of China,\" and will have\nfull and final authority over the economic activities of all agencies\nof the Government.\n- 12 -\nIf the Supreme Economic Council acts with energy, the\npolitical effects should be very far-reaching. One effect will be\nto ease the political tensions of China. There is little if anything\nin the program enunciated by the Generalissimo to which the Communist\nParty of China could take exception, in the light of their own\nannounced economic programs. The work of the Supreme Economic Council\ncan and should be a first step in providing an economic base for unity\nwith the Communists.\nIt must be recognized, however, that the immediate program\nlaid down by the Generalissimo for the Supreme Economic Council is\nas yet largely a statement of good intentions. What counts will be\nthe action taken to make good the intentions.\nLeft to their own devices, the Chinese will find it\nexceedingly difficult if not impossible to carry out many important\nparts of this new economic program. China lacks the administrative\nand managerial experience and personnel necessary to get such a\nprogram soundly under way, not to mention shortages of essential\nmaterials and physical equipment.\nThe Generalissimo stated to me his view that foreign help\nis indispensable to China if her economic reconstruction and develop-\nment are to make real and rapid progress. Recognizing as he does\nthat America has no intention of exploiting China or trying to\ndominate her, he would like to see the American Government send\n- 13 -\nto China an Economic Advisory Commission which would reside there\nfor a considerable time and work closely with the Supreme Economic\nCouncil. This request is embodied in his letter of November 26th,\nwhich I have handed to you.\nIn my opinion, the United States can properly grant this\nrequest. I recommend that an Economic Advisory Commission be sent\nto China promptly to work with, help and advise the Chinese govern-\nment in developing and putting into action policies and programs\napplicable to all parts of China, and to which Communists as well\nas Kuomintang adherents could give support.\nTechniques for practical cooperation between an American\neconomic mission and the Chinese government have already been\nestablished and have worked well in the relationship between the\nChinese War Production Board and the American Production Mission sent\nthere to aid China in 1944. Experience in this operation affords\nboth a guide and a sound reason for believing that an American economic\nmission with an even broader purpose can be effective in China.\nI pointed out to the Generalissimo the difficulties of\nrecruiting highly qualified men in this country for residence in China.\nAs a measure to help overcome this difficulty, I suggested to him that\nhe explore the possibility of creating in this country a con-\nsultative board of leading Americans who would advise the Chinese\ngovernment on economic matters primarily from the standpoint of\n- 111 -\nrepresentative American industry, and aid them in recruiting superior\npersonnel for work in China. The Generalissimo and Premier Soong\nboth expressed their approval of this suggestion and their\nintention to act upon it, if you have no objection.\nDuring my stay in China I also carried out your instructions\nto terminate the American Production Mission, established in 1944\nto aid China's war production. All personnel of the Mission have now\nleft China. This action, taken in conjunction with the formation of\nthe Supreme Economic Council is considered in China as marking the\nend of the wartime phase of America's economic cooperation with China\nand the beginning of postwar cooperation between the two countries.\nIII. OBSERVATIONS ON THE POLITICAL SITUATION\nI strongly feel that if the action which the Generalissimo\nhas taken in the e conomic field is paralleled by forward-looking\npolitical action, the result can be to end civil strife and speed\nup China's reconstruction and development. Neither Chiang's\ngovernment nor the Communist party of China is committed to war.\nBoth sides need peace in order to do anything constructive for China.\nGenuine peace in China is inconceivable while two authoritarian\ngovernments stand opposed. Their only hope of peaceful cooperation\nlies in a mutual and simultaneous ending of authoritarian govern-\nment. Both sides could, I believe, be brought into a government\nwhich vigorously took the road toward true democracy, both political\nand economic. Given genuine democratic government in China, the\n- 15 -\nwill of the peacefully-disposed Chinese masses could make itself felt;\nand I think the mutual distrust of the Communists and the National\nGovernment would in time be sufficiently removed to make possible\n2. fusion of their two armies. In setting up a sound basis for\ndemocracy in China, it would, of course, be necessary to safeguard\nthe country against authoritarianism in any form, be it from the\nleft or from the right.\nAlthough I had no contact with the Chinese Communist Party,\nthe overall political situation was made abundantly clear to me, not\nonly by experienced American observers but also by loyal supporters\nof the present regime who are nevertheless sufficiently objective and\naware to face the realities of Chinese political life. The outstanding\nfact is that the Central Government has been steadily losing the broad\npopular support which it had in its earlier years, and which it\nregained briefly as a result of the victorious ending of the war.\nThe people in Kuomintang China feel that there is little to choose\nbetween the Central Government and the Communists so far as their\nwelfare is concerned. That state of mind was so evident that I had\nno hesitation in speaking of it frankly to key officials of the\nCentral Government who recognized the fact and its implications.\nThe dissatisfaction of the people, however, does not seem\nas yet to have seriously impaired the status of Chiang Kai-shek\nhimself. Apparently most of the people still strongly believe in\nhim and do not blame him personally for the deficiencies of his\n- 16 -\ngovernment. Here and there he is bitterly attacked -- in Chungking\nI received anonymous communications through the mail warning me not\nto trust Chiang -- but on the whole it is certain of the Generalissimo's\nministers and officials who bear the brunt of mounting criticism.\nRecent relaxation of the censorship of the Chinese press\nnow permits the publication of anti-goverment journals in Kuomintang\nChina and these journals are hot in attacking the obvious abuses and\nfailures of the government. Some conservative Chinese regard the left\nwing press with alarm as a harbinger of revolution, but the more\nprogressive members of the government agree that it serves as an\nessential safety valve for public opinion and as a healthy influence\non the government. Careful readings of the Chinese press, added to\ntalks with Chinese in all walks of life, strongly suggest that the\nChinese people today base most of their political criticism of the\nCentral Government on three counts:\n1. Failure to give democracy to China. Several times\nin recent years, the Central Government has promised to\nconvene a constitutional assembly which would give China\na democratic constitution, but each time the assembly has\nbeen postponed. The Chinese pe ople want democracy.\nPsychologically they are ready for it. They resent authori-\ntarian practices. As matters stand, many essential operations\nof the government are under the direction of reactionaries\n- 17 -\nwho have no genuine feeling for the pressing needs of the people\nund who are consequently a deadweight on China's progress\nin this critical time. There is no means by which popular\nopinion can get rid of incompetence in high places, or prod\ninto action those government officials who are weltering in\npolitical and economic plans without doing anything construc-\ntive about them. Often governmental decisions of the greatest\nurgency are endlessly delayed. Even when such decisions are\nfinally made, they may not be carried out with sincerity or\nexpedition because of a lack of a sense of responsibility\namong officials who feel themselves remote from the people\nand who cannot be called to account by the people.\n2. Tolerance of pro-Japanese elements. In many places in\nthe liberated provinces of China the Government is using the\nservices of former \"puppet\" officials who collaborated with\nthe Japanese. In some areas armed Japanese troops are employed\nby the Government. Officials of the Central Government state\nthat the use of \"puppets\" and Japanese is a temporary expedient\nto enable the government to gain control of the mechanisms of\npolitical and economic administration with a minimum of disturbance.\nBut the people see native traitors and enemy nationals accorded\ndignities and comforts while cold and hunger are the lot of\nmillions of Chinese, and resentment is growing.\n- 18 -\n3. Widespread corruption. Official corruption is of\ncourse an old story in China. It is especially hard to eliminate\nbecause of the institutional quality which it has taken on as\na result of centuries of \"squeeze\". Government salaries in\nmany cases are so small that government employees cannot\nexist without supplementing their incomes by whatever means\ncome to hand; and political graft is taken for granted among\nthem. The people, I was told, are becoming increasingly indignant\nas they see government and Kuomintang officials fattening their\npurses at the public expense, and without even providing efficient\nadministration in return. I heard indignation particularly\ndirected at provincial and municipal officials who, starved for\npolitical spoils during the war years, have now descended on\nthe liberated provinces and cities like hungry locusts.\nThe Generalissimo has indicated his determination to bring\nabout needed political reforms in China. For example, in establishing\nthe Supreme Economic Council he promised the people that corrupt\nofficials would be sought out, removed from the government and severely\npunished for their crimes. Moral reform would certainly help China\ngreatly. But China's primary need is for far-reaching action by\nthe Central Government not only to reform but to transform itself\ninto a government representative of the people and working for the true\ninterests of the people.\n- 19 -\nThere are of course many reactionaries in the Central\nGovernment who would oppose any such development. But I believe\nthat key men of the government stand ready to make the fundamental\npolitical changes which China requires, if they are shown how to\ndo it and given help in doing it by the United States. Just as\nthey responded to American inspiration and guidance first in\norganizing for war production, and now in taking the initial postwar\nsteps looking toward a progressive economic program, so I believe\nthey would respond to our inspiration and aid in bringing democracy\nand sound government to China.\nIf, with the help of the United States, China adopts\npolitical measures aimed at the early introduction of democracy while\nvigorously pursuing her new economic program, it should not take long\nto allay the violent political antagonisms which are now tearing her\napart. The Communists have every reason to support a government in\nwhich they would share, and which would permit the peaceful political\nevolution of China.\nIf China wishes our help in establishing democracy and\nsound administration, I believe that this government ought without\ndelay to work out methods of practical cooperation with the Chinese\nin efforts to prepare an effective democratic constitution, separate\nChina's Kuomintang party from the National Government, eliminate\nauthoritarian practices, set up modern governmental organization\nand procedures, and create and protect the \"grass-roots\" institutions\n- 20 -\nof local democracy in villages, towns, cities and provinces. This\nmight be done in part by sending qualified American specialists\nin such fields as constitutional law, government, and public\nadministration to China to give aid and counsel, and in part by\narranging for visits to this country by Chinese officials for\nthe purpose of observing the practical operations of democracy\nat first hand.\nIn addition to such arrangements, there is in my\njudgment strong need for full and frank discussions with the\nRussians and the British as to the nature and purposes of our\ncooperation and theirs with China in the economic and political\nsphere. Such discussions carried on against the background of\nAmerican aid to China aimed at genuine political and economic\ndemocracy could, I believe, go far to assure Russian and British\ncooperation in encouraging a peaceful solution of the existing\nstrife in China. It is conceivable that a common policy toward\nChina by the great powers might result, and that constructive\nleadership by America in promoting needed political and economic\nchanges in China could be of major importance in bringing about\ncloser international cooperation generally.\nIV. THE PRESENT \"BREATHING SPELL\" IN CHINA\nAs I said to you in my memorandum of August 20 (\"A\nProposal Aimed at Averting Civil War in China\"):\n- 21 -\n\"If civil war comes to China I think it will be long\nand costly. I feel sure that the Central Government cannot\nwin a quick victory\nUnder circumstances much more\nfavorable to them than this existing today they tried\nconsistently throughout the ten-year period preceding the\nJapanese war to destroy the Communists, and failed. The\nCommunists, although at the present time probably even\nless well equipped than the Central Government's troops,\nare highly disciplined, well entrenched in a relatively\nimpregnable area, skilled in guerrilla warfare, and ably\nled\nIf they can get hold of considerable quantities of\nJapanese arms -- as seems likely -- they will be even more\nformidable opponents.\nI was reliably informed in November that the Communists in\nSouthern Manchuria have acquired large stores of Japanese munitions.\nThe effectiveness of Communist propaganda behind the\nCentral Government lines must also be reckoned with in the event of\nfull-scale civil war. Communist promises and some demonstrations of\ntheir policy in giving the people personal ownership of land, reduced\nrents, taxes and interest rates, better government and higher wages\nare attractive to the Chinese peasants and city workers. Because of\nprolonged blockade and lack of industries, people in Communist China\non the average are probably even worse off than people in Kuomintang\nChina, but at least the Communists have tried with some success to\nequalize the hardships of life in China -- a fact which has great\npopular appeal.\nRealistic men in the Central Government are keenly aware\nthat civil war could only intensify China's suffering over a period\nof years and might end by defeating the constructive aims of both\nthe Central Government and of the Communists, leaving China in\npolitical anarchy and economic destitution.\n- 22 -\nI think it likely that in the event of full-scale fighting\nboth sides would make use of Japanese troops now in China. This\ndevelopment is suggested by the Central Government's current employ-\nment of armed Japanese soldiers for the protection of communications\nin some outlying areas of North China, and by the surprisingly good\nliving conditions of Japanese prisoners, as observed in concentration\ncamps. Troops of the Japanese puppet governments of the liberated\nprovinces are also currently serving the Central Government. There is\nobvious danger that under these circumstances civil war would give the\nJapanese a rare opportunity to help keep China divided and weak.\nThe policy of this government is that our troops in China\nwill not take part in China's internal strife, and that they are to be\nbrought home as soon as they have finished their job in helping to disarm\nand repatriate the Japanese. But to my mind it should also be made\nplain to the world that the presence of these troops is giving China an\nall-important \"breathing spell\". It should be made plain that we are\nusing this opportunity to aid and encourage the adoption by the\nChinese Government of economic and political measures designed to\nprovide an enduring basis for peaceful settlement of the struggle with\nthe Communists, and which will bring a fuller life to the Chinese people.\nThe world would welcome such action on our part. It would be the\nclearest possible proof of the soundness of our present policy in\nChina.\n- 23 -\nV. SUMMARY OF REC ENDATIONS\nThe aspirations of the United States for an expanding\nworld economy in which we, like other peoples, can find security and\nrising living standards, demand a peaceful and developing Orient.\nWe now have an opportunity to utilize our influence in\nChina to end civil war and speed China's reconstruction, development\nand democratic evolution. We can do this by encouraging and assisting\nthe Chinese Government to take constructive economic and political\naction, aimed at national peace and unity. The adoption by the\nGeneralissimo of a liberal economic program and the establishment of\nthe Supreme Economic Council are an encouraging sign of good intentions\nin the Central Government. We need to follow up this first step without\ndelay.\nIf we fail to utilize our opportunity, if we confine our\npractical cooperation with China to the military sphere, we are bound\nto be confronted by what Walter Lippman has called a \"horrid dilemma\":\neither we will become entangled in China's civil war or, when we get\nout of China, we will leave her hopelessly divided, dangerously weak,\nand an inviting prey for foreign imperialism.\nAs I see it, there is only one way to get off the horns of\nthe dilemma. That is to aid the Chinese government to take immediate\neconomic and political measures which can produce political unity\nbefore our troops leave China.\n- 24 -\nThe Central Government is keenly aware of its need for good\nrelations with Russia. Russia has reason to welcome American influence\nin China while that influence encourages political and economic\ndemocracy, and internal peace. Given the necessary aid and stimulation\nfrom this country, I feel that China could make great strides in its\nforeign relations, and that the international stresses and strains\nwhich now center there could be greatly eased in a short time.\nThe four specific recommendations for action by this country\nmade in the preceding pages all have the single aim of assuring a\npeaceful, democratic and developing China, on good terms with the world.\nSummarized, these recommendations are:\n1. That America send a qualified economic mission to China\nas soon as possible to aid China's Supreme Economic Council to\ncarry out its liberal program and generally to further China's\neconomic reconstruction and development.\n2. That we give full practical cooperation to the Generalissimo\nand his Government in democratizing China's political life and\nproviding modern and efficient government.\n3. That we discuss with Russia and England the nature and\npurposes of our cooperation and theirs with China in the economic\nand political sphere, and work out if possible a common policy toward\nChina.\n4. That we make it clear to the American people and to the\n- 25 -\nworld as a whole that the presence of our troops in China\nto assure the disarming and repatriating of the Japanese pro-\nvides a br athing spell from civil warfare, during which we are\nencouraging and helping China to put into effect political and\neconomic measures needed to provide a basis for lasting peace.\nIn my view, action openly taken along these four lines could\nbe of enormous aid to China. It would end the dilemma of policy in\nwhich America now finds herself with respect to China and it would\nhave the overwhelming approbation not only of the American and\nChinese people but of world opinion as a whole. Out of these actions,\nif properly carried through, could emerge a democratic and peaceful\nChina, contributing on an ever-increasing scale to the expanding world\neconomy on which the world's future, and America's depends.\nEdwin a."
}