CIA HISTORICAL REVIEW PROGRAM RELEASE IN FULL
the current situation in china
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SE0RET
Conimunisl-coritrolled regime, under Soviet Uiflucnce Lf not under Soviet control, and uncooperative toward the US If not openly hostile. The latter development would result In an extensive loss of US prestige and Increased Communist Influencethe Far East, as well as an Intensification of threat to US Interests In the Western Pacific area.
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THE CURRENT SITUATION IN CHINA
or China.
An Independent China, ruled by an effective Government, would tend to promote stability In the Far East. The disorderly conditions which now prevail in China affect adversely the prospects ol economic recovery and political stabilization both within that country and throughout the Far East. Moreover the instability of the National Government facilitates the extension of Communist influence throughout China, and strengthens the position of Communist groups In Korea, Japan, and the countries of Southeast Asia.
For the US, Chinaotential danger area which might involve the US In an armed conflict with theommunist victory over the National Government In the present civil conflict, resulting In Communist control aver China, would seriously challenge the US position inommunist China would facilitate theof Soviet influence throughout the Far East and thus presentdirect threat to US security interests throughout the Pacific area.
Thc overriding Soviet concern In China, as In all areas adjacent to the USSR, Is to make certain that China cannot be usedase of attack against the USSRall Soviet measures toward China are taken primarilyiew to gaining control over those parts of China adjacent to Soviet territory. In addition to the defensive and offensive Importance of this area to the USSR, the economy of China's northeastern provinces Is complementary to that of the Soviet Far East, and the mast favorablefrom Siberia to the sea traverse Manchuria, The long-range aim of the USSR Is lo extend tts influence over all of China through the mediumhinese Government both friendly to and Ideologically sympathetic with the USSR.
Political Situation.
The past year in China has witnessed increasing instability In Nationalist China, and the steady advance of Chinese Communist military arid political influence. The mosi ominous aspect of the Nanking Govenunrnl's piesent position is the fact that the US aid program,holding action" at best, Is practically the only positive factor promoting the stability of the National Government.
The present Government, under the new Constitution. Is essentially no different from its predecessor Chiang Kai-shek, now first President ol the Chinese Republic, has re lamed actually the powers he held formerly as Ptesident of Ihe NationalThere is, however, increasing dissatisfaction with his leadership. The failure of the National Government toonstructive solution to military and economic problems has resulted in an increasing demand for fundamental reforms, but the deteriorating economic, political, and military siluation limlU the possibility of the Government taking constructive and eflective action along this line. Any prospect
for positive reforms, therefore, appears to hinge on some slackening In the rate ofChiang Ral-shck himself has shown no genuine Inclination to take any positive measures toward reform or to reorganize his Government along morelines, and even should he do so, the conservative landlord groups from which Chiang derives much of his support would hardly accept the desired reforms.
ol Popular Support.
Except for the Chinese Communist Party, opposition to the National Government has been largely unorganized, lacking armed strength and therefore relatively Ineffective. The Nanking Government lacks popular support amongand liberal groups of politically conscious Chinese. Although there Is no single program to which they all subscribe, sentimentompromise peace isamong these groups. To many of them. Chiang Kai-shek Is no longeras national leader, and they keenly resent any form of assistance, domestic or foreign, to bolster the present National Government's position and prolong its rule.
within the Kuominlang and Nationalthe Kuominlang. also, dlssatlsfaction with the present National
Government as it Is now constituted under the leadership of Chiang Kai-shek has become increasingly evident In recent months. The election of Chiang Kai-shek to
the presidency in April, confirmed him In his position of leadership, andresh
demonstration that throughout Nationalist China there Is no other personality who can so effectively rally the support of the various Kuominlang factions and cliques.
However, the victory ofsung-Jen in the contest for the vice presidency reflected popular dissatisfaction with Chiang's failure to effect reform measures andote of protest against the Ineffectiveness of his Government.nd his group are reportedlyrogram for military, economic, andreform. Moreover,s believed to favor the development of China along the lines of federalismonsiderable degree of provincial autonomy. In markedlo Chiang's insistencetrongly centralized government. Public statementslso Indicate that while he Is anti-Communist, he may be less averse to reopening political negotiations with the Cornmunists than Chiang, who remains unalterably opposed toourse. Since the terms of the constitution confer no specific powers on the vice president,ust seek to achieve his program by appeals to public opinion ond by tactics of persuasion with Chiang Knl shek.
If frustrated in his efforts to persuade Chiang to alter his policies. Li and his group may seek loon-Communist revolutionary movement, capable eventually of bringing about Chiang'srobably can count on theof General Pai Chung-hst. his former associate In Kwangsi province,arge segment of southern troops. Ifovement develops. II might also attract the support of the Hong Kong dissidents, who reportedly are In close contact wilh Li, and would probably attract the support of many within the National Government who have come lo the conclusion that It is futile to hopeavorable military solution In the civil conflict.
A more dangerous threat lo Chiang'* position, however, has developed within the Kuominlang Inner circle, where certain hey Party leaders from whom he has derived his sirength (or years, no longer appear capable of providing him withsupport. The nature of this rift within the Kuominlang was recenlly revealed In Chiang's difficulty Inew premier (President of China's executiveeveral prominent political figures refused the appointment because ofopposition.ompromise, Chiang appointed Wong Wen-hao. an able administrator but, owing to his lackolitical following,trong leader.
In addition to the internal opposition developing ateeling of Independence Is growing among Nationalist civil and military officials In North China,esult of the Inability or the unwillingness of the National Government to extend them realistic military support Also separatist tendencies continue ln various outlying provinces among warloids who maintain regimes virtually Independent of Nanking.
Croup in Hong Kong.
An opposition group composed ot former Kuomintang members and headed by Marshal Li Chl-shen, has organized the "Kuomintang Revolutionarywith headquarters In Kong Kong. It is the plan of this group to establish In the nearival "provisional government" somewhere on the mainland of China, probably In the southwest. While non-Communist In sentiment, Marshal Li hasa policy of cooperation and negotiation with the Communistsiew toolitical solution of the civil conflict and tooalition government. The strategy of Marshal Li's policy Is to gain for his government the immense popular support throughout Nationalist China that, in his opinion, would be assured any government responsible for restoring peace. This group also reportedly Is In contactsung-Jen, Nationalist Vice-President and leaderreform" movement within the Kuominlang. Lacking military strength, tt Is Improbable that the dissident group under Marshal Ll can intervene decisively in Chinese politics except In an alliance with the Communists, or as partossible non-Communist revolutionary movement, uniting various discontented elements in Nationalist China.
Fall of Chiang Kai-shek.
Although the withdrawal of Chiang from the political scene In China may not be imminent, the pressure for his removal ts steadily increasing and willto do so as long as the National Government under his leadership shows no greater capability in coping with its military and economic problems. The departure of Chiang, for whatever cause, woutd probably be followed by acceleratedof the Kuomintang and National Government. The Chinese Communists would exploit such conditions and would derive the initial advantages While theof Chiang's dominating personality would open the way for the formationroadly representative government under new and progressive non-Communistthe availability of such leadership, as well as lis capabilities, remains
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b. Economic Situation.
Deterioration In the National Government's economic position, as measured by note Issue, commodity prices, and black market exchange rates for foreign currencies, hu been accelerating at an ominous rate. Since the first of the year, currencyexclusive of Issues In Manchuria and Taiwan, has Increased morehe price of rice hasnd US dollars on the Shanghai black market have% in terms of Chinese National currency The budget for the first sot months8 estimated atrillion has proved inadequate. The budget for the second half8 is estimated at0 trillion.
The wholesale price of rice inardstick for measuring the domestic purchasing power of the National currency, has continued to incieaseaster rate than the amount of currency in circulationesult of the Government's attempt lo compensate for the declining value of the Chinese dollar by Issuing more and more paper money.ie prire of rice wasunes higher at the end7 than at the endhile outstanding note Issue Increasedimes In this period. The estimated0 trillion outstanding on8urchasingess than therillion outstanding at the end of8ess lhan therillion outstanding at the end of December
Industrial production, In general, has beenow level since the end of the war. The cotton textile Industryarked recovery from the effects of the war with Japan, but evenutput was still below prewar production levels. The problems of government controls, the difficulties of obtaining raw materials, and the risks caused by the spiralling inflation have made the task of conducting any kind of productive private enterprise almost InsurrcounUble. The widespread feeling of uncertainty now prevalent In Nationalist cities has iccentlyurtherin industrial production. In some areas, such as Shanghai, plants are being removed to Hong Kong, thereby depriving the National Government of much needed manufactured goods. Agricultural output in Nationalist areas, however. Is generally at prewar levels.
China's imports for the first four months8 are recorded atillion; exports during this period were only two-thirds of imports. The monthly trade deficit has Increased from USillion in8 andor February, toillion in March and USillion forew exchange link system was inauguratedhiefly to stimulate exports and provide badly needed foreign exchange for imports Reaction lo the new system by exporters and importers
Is generally favorable, but cautious. Exports, however, increased only slightly by the
end Of8
The deterioration in the Government's economic position reflects the general lack of confidence with respect to the Nationalist Army's abilily to contain themilitaryingle major military defeat sustained by the National Government might create such an over-all feeling of despair with respect lo the future
* -Purcr.eiir.aj power" is baaed on the wholesale price ot rice in Shi %hkh Is aomewhat lower than ihc ecnetat commoditylevel.
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ol the Government as to resulteneral refusal to honor the Chinese dollaredium of exchange. Reportedly, there have already been many Instances where barter rather than the exchange of goods for money has occurred. In some sections of South China, commodity prices are quoted lo Hong Kong dollars Instead of the Chinese National currency.
The US aid program Is the only Tactor now In evidence which may possibly retard the accelerating deterioration In the Government's financial position anda complete monetary collapse, though to date the passage of the aid bill has had no noticeable effect on prices or on the black market foreign exchange rate. This reflects the fact that controlling elements In Chinese financial circles have substantially discounted the effectiveness ol US aid.
The repudiation of the National currency would cause economic and political chaos in urban areas and have serious implications with respect to the Nationalmilitary effort. The Government's ability to maintain its armies in the field would be jeopardized and the probability of an early military and political defeat would be increased.
There Is no evidence that the Government can cope with mountingpressures. The apparent inability of the National Government to stave off the approaching collapse of its financial structure is due in part, at least, to itswith the even more pressing military and polilical problems.
c. Military Situation.
Sincehen the Nationalist Army was forced on the defensive, the admitted advantage which the Nationalist Army held over the Communistsas been gradually reduced to the point of parity, and in some areas both initiative and advantage have passed to the Communist forces. In view of the declining capabilities of the Nationalist Army, the military pressure of the Communists in Central, North, and Northeast China will probably further reduce Nationalist-controlled sectors of these areas.
ersonnel and Intelligence.
8 the tactical troop strength in the Nationalist Army was estimated to be. These regular units arc supplemented byervice troops and bydditional provincial troops of varied combat capabilities. In addition. Nationalist Ground Forces are bolsteredmall Navy and Air Force which, being unopposed,actical and strategic Importance beyond their numerical strength. The entire Nationalist military establishment is plagued, however, by glaring structural and command weaknesses. Twoalf years of combat attrition has greatly reduced the percentage of trained fighting men in its tactical units, while combat and temporal attrition has reduced the numbers and effectiveness of its weapons and transport. Moreover, the Nationalist Army has largely exhausted its manpower reserve by unrealistic extensive garrison commitments.and conscription programs, the latter all too often marked by vicious press gang methods, have failed to net the recruits necessary for adequate field replacements.
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Training of Nationalist recruits has been deficient and the leadership has been In-competent, and saturated with graft
Among the most serious deficiencies in the Nationalist military establish-ment is the lackell conceived and executed Indoctrination program and the marked absence of beneficial understanding between officers and their troops. As amorale Is exlicmely low. approaching defeatism in areas where the Communist threat is the Greatest. Then too, Nationalist Intelligence has been generally ineffective and often In error regarding Communist capabilities as well as Intentions.the Nationalist Army is repeatedly caught off balance, with the result that it often sustains serious losses which would otherwise have been avoidable.
Weapons and equipment in the Nationalist Army are characterized by their heterogeneity: the products of various European. American, and Chinese arsenals Largely because of their US equipment, which Includes air'and naval arms, the Na-tionalists have enjoyed an advantage in fire power. The Nationalists alsolight edge over the Communistsrsenal capacity, but lengthy transportation lines shortages of all types of transport vehicles, and constant and extensive Communist depredations in the northern areas have created extremely complex and practically insoluble logistic problems for the Nationalists.onsequence, they consistently find their operational potentialities curtailed by deficiencies in fighting materiel at the fronts.
and Strategy.
With Initial advantages In numbers and fire power, the Nationalists set about to capture the major cities of North China and Manchuria and to open the main overland routes of communications In this they attempted to employ orthodox tactics of offense, but. lacking adequate Industrial and transport support andgeneralship, they were singularly unsuccessful; during the past year they have largely been reducedefensive role. The Nationalist,tatic defense of fixedolding up within prepared defenses and passively awaitingattacks. Possessing more modern arms and an air force, the Nationalists have been able to concentrate at strategically vital points (le, Mukden) and have thus far deterred the Communists from undertaking all-out assaults on such points By controlling the most important railroad Junctions, the Nationalists have thus denied the Communists through traffic on these lines.
A shift in Nationalist strategic concepts has been apparent sincehen the Nationalists began toew willingness to evacuate points 'lacking In strategic Importance" The old Communist capital of Yenan. Kirin in Manchuria, most of the coastal towns on Ihc north shore of the Shantung peninsula, and Tolun in Chahar have already been abandoned Previously, the Nationalists had long refused lo undertake even tactically salutary withdrawal, That ihey should do so. now probablyrowing realization among National Government leaders of their very real limitations In resources.
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perations.
Because Nationalist tactics generallyattern of static defense,
the Communists are able to choose the time and place of battles. From tune to time Nationalist leaders present plans for broad offensives but since the conclusion of the Shantung Campaign Inationalist action has been limited to counter-ofTcnMvesocal nature. Every indication Is that this course of events willthe Nationalists' ability to undertake even local actions will be gradually and progressively curtailed.
d. Foreign Relations.
The foreign relations of the National Government are dominated by Issuesthe US and the USSR. The passage In April of the China aid bill endedas to whether the US would support the National Government, but the question remains as to whether such support will be continued and If so. In what amount Implementation of US aid to China Is also complicated by the question of US controls and supervision, and US Insistence upon accompanying economic,and military reforms. Anti-US sentiment, which is already apparent, may be further aggravated hy Chinese elements Interested In diverting present unrest and discontent into anti-foreign manifestations. In addition, thereifference of view between the US and China on the Japanese peace settlement. Nationalist officials have voiced qualified approval of the US rehabilitation program for Japan, but Chinese sentiment, as expressed in the press. In student demonstrations, and in resolutions In the popularly elected National Assembly and Legislative Yuan, is apprehensive of US policy andonsequent resurgence of Japanese military and economic power.
The USSR represents the chief threat to the security interests of the National Government because of lis long-standing ambitions concerning China's northern border regions and because of Itsf not material, support of the Chinese Communists. Nevertheless, the USSR at present maintains outwardly correct relations with Nanking, and the Treatyesigned to settle outstanding issues, remains in effect as the basis of Sino-Soviet relations.
With the arrival in May of Soviet Ambassador Roshehin.ear long period during which there was no Soviet Ambassador at Nanking, It Is possible that the USSR willore positive role in Chinese affairs. General Roshehin may renew talks with Chinese officialsompromise settlement of the civil conflicts, offer Soviet mediation and undertake to resolve the current impasse in Sinklang Regardless of these possible developments, the USSR may extend covert support to the Chinese Communist Party and to racial groups in China's border areas who oppose Chinese control. Until final ratificationeace treaty with Japan, all attempts to loosen the Soviet grip on Dalren will be met with the legalistic argument that the USSR is authorized to control that area so longtate of war with Japan exists.
The Chinese National Government is not satisfied with the present stale of Sino-Soviet relations, and the Chinese Foreign Minister has publicly called attention to
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Soviet nonobsetvancc o( the Sino-Soviet Treaty. Nevertheless, it Ls the consistent policy of the National Government to abide by that Treaty and to avoid doing anything which might aggravate Sino-Soviet relations. China probably will notirmer attitude unless the US offers China assurance of effective supportis the USSR.
3 Communist China.
a. Political Situation.
The Chinese Communist Party is stronger now than ever before In its history. Its military control extending over approximately one-fifth the total area and one-fourth the total population of China. Tho territory dominated by the Communists Included practically all of Manchuria and large sections of China, north of the Yangtze River, with the exception of major cities. Political and economic consolidation of power, nonetheless, appears to lag behind military successes: the Chinese Communists have no governmentational scale, but continue to administer their areas through the Party machinery and by Border Region and Liberated Area Governments, which vary in complexity tn direct proportion to the stability of the area. The Communist force, several thousand strong, remains unsubdued in the south, mamly on Hainan Island, and sizeable underground forces exist in most oi the large cities of Nationalist China.
The Chinese Communist Party, which nowembership of, is the worlds largest Communist movement outside the USSR and the only one which over the years had demonstrated sufficient sirength to survive and expand without Soviet assistance With practically all of Manchuria under Its conirol, theParly now holds an area of China, fairly rich In natural resources and potcn-tinlilles (or industrial development. The basis (or the Party's strength in China Is Its program of long needed agrarian reforms, whichreat appeal to the impoverished peasantry; ils apparent unity of purpose; and its politically astute Indoctrination and treatment of lhe Iroops. Perhaps its greatest strength, however, comes from thedisillusionment of lhe Chinese people with the corruption and mlsgovernment of the Kuomintang.
The weakness of the Communist Party lies in the general anli-Cornmunistof the Chinese people arising from the early days of Communist excesses in China and the many years of anti-Communist propaganda In the Chinese press; the war-induced necessity of heavy requisitions; and the crude and ruthless execution of land confiscation and taxation in certain areas Also, it Is Improbable that the Party yet has sufficient administrative and technical personnel for organization andof complex urban areas.
A Communist political offensive is underway at present to remedy theseand at the same time to undermine the support of the National Government. Recent directives of Communist leadersroadening of policy in order to attract elements of the population who are dissatisfied with the National Government, bul heretofore have feared persecution under Communist rule. Warnings against the use of brutality and excessive severity in carrying out Communist policies have been
Issued from Communist headquarters. Communist leaders have attempted to appeal to the middle classes ol the cities, petty landowners, and intellectuals by promises ol fair treatment, moderate property confiscation, and leniency In considering former class demarcations. In addition, the Party has moved to accelerate deterioration In Nationalist areas by taking advantage of student and labor unrest.
Thus far the Party has steadfastly refused to enter into negotiationsational Government ruled by Chiang Kai-shek and his supporters. It appears to favor continuation of hostilities against Chiang's Government, with the expectation that economic deterioration in Nationalist China, military attrition in the Kuomlntang armies, and Communist territorial gains in Manchuria and North China, will cause the National Government to disintegrate or compel that Government to negotiate for peace on terms favorable to the Communists. The possibility exists, however, that the Parly might be willing to negotiateational Government headed by some one other than Chiang Kai-shek. If It appeared expedient, the Party mightruce agreement which would recognize their control over areas now held, and permit Communist consolidation and organization of these areas. The Communiststo maintain lhat theyoalition government composed of Communists and members of minor parties and Independents, with the possible inclusion ofmoderates, but they intend eventually to dominate any coalition in which they participate.
Existing trends pointommunist-dommated China, but even if there is no alteration In these trends, it may be many years before that goal Is reached. The Communists may gain control of the Chinese Government more quickly if conditions deteriorate to the point where the Communists can attain Iheir ends through peace negotiations on terms which would require virtual surrender on the part of theGovernment. As long as the National Government maintains any armedhowever, the Communists will have lo assume control through military means. In that case they will be faced with the problem of consolidating administration over areas as they come under Communist power. Considering the heterogeneousof China, the formation ot an effective Communist government for the entire country probably wouldlow process
b. Economic Situation.
The economy of the Chinese Communists is based chiefly on self-containment and therefore is not dependent upon external assets and foreign tradecalewith Nationalist China The Communists have been forced to keep consumer demandsimple level; and through rationing and extensive economic controls they are attempting to supply the people and the army with food, clothing, munitions, and bare necessities. Some commodities arc received from Nationalist areas and from barter trade with the USSR The Communists trade foodstuffs, mainly various grains and beans, for Soviet-manufaclured goods such as agricultural machinery, cloth,and gasoline.
Communist government units in border regions and liberated areas are largely financed in kind. Commercial transactions and capital investments are usually reck-
oncd In terms oi local standard grain, such as millet, although some currency Ls printed to finance expenditures of the various branches of the government. In terms of the CN dollar the Communist dollar Isremium, and worth about CNn the black market In boidcr areas.
Although the Communists haveonsiderable amount of additional territoryesult of recent military successes, the possibUilies of exploiting these areas are limited by the Nationalist occupation of key industrial centers and Important transportation terminal points in North China and Manchuria.
c. Military Situation.
The Communist Army appears to be gradually transforming itself from aorganizationore orthodox military machine Originally anrighting small scale, isolated battles and retreating before superior force, it is now capable of carrying the fight to the enemy and engaging in actions over broad areas and over considerable periods of time.
(I) Personnel and Intelligence.
he Communist military force consisted ofegulars which are from time to time bolstered by forces of Irregulars, pressed Into active service when and if the local situation demands. In the past thehave been able to recruit new men (by both moral and physical pressures) as quickly as they are able to feed and equip them Irregular forces provide trainedfamiliar with Communistrowing tendency of defection fromunits provides the Communists with manpower of limited numbers and utility. Communist morale is markedly superior to that of the Nationalists as the resultleverly conceived and continuing propaganda campaign. Officers in the Communist forces are said to be chosen and advanced strictly upon field-tested merit, and leadership has been able, honest, and on good terms with the troops
esult of their vigorous propaganda and land redistribution, theforces have attracted considerable support from the poorer Chinese peasants who feed and help clothe the Communist Army as well as provide replacements for it In addition, these peasants furnish extremely valuable local intelligence which enables the Communists repeatedly to surprise Nationalist garrisons, to hit only the more lightly defended points, and to ambush Nationalist troops while in transit The Communists alsoairly extensive fifth column, which provides valuableIntelligence while engaging in political propaganda activities.
ogistics.
Weapons and equipment of the Communist forces were acquired primarily from Japanese Army stocks in Manchuria and North China during and subsequent to World War II. During the past two years, the Communists have supplemented this by capturing considerable Nationalist materiel, including US-type equipment.Communist materiel reflects the same heterogeneity as does the Nationalists'. The Communists, however, limit their actions to the realities of their logistic difficulties.
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actics and Strategy.
The Communists,ealistic appraisal of their own limitations inweapons, and Industrial backing, earlytrategic pattern, based on guerrilla tactics, which has enabled them lo realize the maximum results withresources. The strategy, In Its early stages, alms at Impeding the government's efforts whenever and wherever feasible. Depredations against lines of communications, isolation of entire active areas to prevent mutual support, and encirclement ofurban areas to throttle the flow of farm produce and raw materials are economic in design. Militarily designed arc the Communists' efforts to draw Nationalist forces into extended, vulnerable salientshere to pin down andIndividual units. Refusal to join pitched battles except when and where they haveuperiority in men and materiel hasieat extent negated the Nationalist advantage In fire power. Mao Tse-tung has enjoined Communist forces that, before any battle is begun, their strength should be double, triple, quadruple, even five or six limes that of the enemy. While this tactical pattern has conserved and built up Communist units, it has also permitted the Nationalists to retain their hold on large and Important cities situated in areas where the countryside has been overrun by the Communists. Over an extended period, however, the Communists in this way gradually build up their forces until they are sufficiently strong to challenge thehold on even such places.
perations
Communist advantage has been most strikingly demonstrated inwhere the Communist Army, in midwinter,wcek offensive (the longest to lhatompleted the encirclement of Mukden, and annihilated some seven key Nationalist divisions. Since the termination of this offensive Inhe Nationalists have demonstratedly lacked the strength to reopen the corridor along the railroad from the Great Wall northward to beleaguered Mukden. Moreover, along with the capture of Ssuping and Kirin, the Communists gained control over the entire Manchurian railroad system except the junctions at Changchun and Mukden The Communis Is are rushing through repairs on the newly acquired lines. Whenthis added rail support may permit the employmentew strategic plan, following more orthodox lines and perhaps evenirect assault upon Mukden. At least the possession and operation of these lines willore extensive logistic backing, greater mobility over broader areas, and greater striking power to thedeveloping Communist attack in Manchuria.
Communist military activity in North and Central China has been more limited in character andiversionary pattern. Here, Communist operations stall follow guerrilla tactics of mobilityroad area, of harassing communications with occasional feints or attacks on Important points withdrawing in the face of Nationalist pressure These tactics keep the Nationalist forces off balance and occupy alarge number of Nationalist troops In view of the Nalionallil shortage of reserves, this docs not allow the release of units to reinforce other fronts without losing
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Ihe areAS from which those troops arease In po,nl recently occurred In Shantung Province where the gainsairly successful Nationalist offensive have been all bul completely nullified by the Communists, following the withdrawal of regular Nationalist divisions torowing Communist menace in Manchuna and Central China Communist activity In widely separate sectors of North. Northwest, and Central China keeps these areasonstant turmoil with Ihe Nationalists groping to find Uie main body of the marauding Communists, completely unaware of the direction and timing of the next Communist threat.
d. Foitign Relations.
While the Chinese Communist Party appears to operate independently of Soviet directives, particularly in its internal policy. It has never come Into direct conflict with the Soviet party line on any important international issue, and II is unlikely that it would attempt toine of action which the USSR strongly opposed The extent to which the USSR could exert pressure on the Chinese Communists, for any particular cud, such as the negotiationompromise peace wilh the National Oovcrnment, nevertheless remains undetermined.
Contrary to the terms of the Sino-Soviet Treatyhe USSR has given its moral support lo the Chinese Communists, as opposed to the National Government Aside from turnovers of captured Japanese arms in Manchuria, and Soviet refusal to permit Nationalist troops to enter Manchuria via Dalren, however, thereack of evidence lhal the Chinese Communists have been assisted by material Soviel aid
There are Increasing indications that during the past several months there has come into existence an International Communist organization for the Par East. In which representatives of the Chinese Communists have participated along with those from other Far Eastern countries and the Soviet Union If the Chinese Communist Parly ever gains control of ihc National Government it would presumablyoreign policy friendly to and cooperative with the USSR It is unlikely, however, that the USSR would ever dominate China through the medium ot the Chinese Communist Party, as il is able lo dominate Eastern European countries through Indigenousgroups, because of the vastol China and its disorganisation, strong regional tendencies, and the Chinese proclivity for anti foreignism
The Chinese Communist Party has become extremely antagonistic to the US; anti-US propaganda has become Increasingly vehement. Apart from international Communist hatred for the US, the Chinese Communists associate the US with theof Chiang Kai-shek's regime The final passage of the US China aid bill prompted radio broadcast charges that the US was making an Investment in the Chinese civil conflict in order to transform ChinaS colony; that "American Imperial-Ism" had formally declared war on the Chinese people Such propaganda conforms with the traditional anti-foreign sentiment among the Chinese and appeals to those who feel that the US. byorrupt and reactionary regime, is an obstacle to progressive action. In the eventommunist-dominated regime come* to power in China, its attitude toward the US may be greatly influenced by the actual slate of foreign relations between the US and Ihe USSR
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4. Probable Future Dfjvelopments.
The position of the present National Government Is so precarious that its collapse or overthrow may occur at any lime. However, II may survive with dirrdnishing power for some time, but soon become only one, and perhaps not the most important of several regimes exercising governmental authority independently in Nationalist China. By the end of this year, the Chinese Communists will have made additional regional gains in Nationalist territory in northeast, north and central China, but most of the major cities probably will remain under Nationalist control as Isolated strongholds.
While the US aid program has somewhat lifted morale in National Government circles, many Chinese view the aid program as prolonging the agony of, rather than resolving, the civil war. It is true lhat the aid bill promises some tangible benefits, such as alleviating the tight foreign exchange position of the Government, financing some needed reconstruction projects, and furnishing indirect military aid, and that these benefits will relieve some of the economic pressure on the National Government. But without marked improvement in Ihe efficiency of government operations, elimination of corruption on high government levels, an increase in the efficiency of the civil service and military establishment, and an earnest attempt to effect reforms which have hitherto been discussed but not implemented, the US aid program will providehort-lived respite for the National Government.
As conditions in China continue to deteriorate. Die forces of opposition lo the present National Government and the leadership of Chiang Kai-shek will gain strength. If these forces of opposition should coalesce, they mightovement withmilitary strength and popular support to force the removal of Chiang Kai-shek and take over the National Government. Wilh or without Chiang's overthrow, the most likely prospect is increasing political and military regionalism, and furtherof the National Government until it is no longer able lo command authority over any but local areas. Rather than passively accept such disintegration. Nationalist civil and military officials will be increasingly inclined toward negotiations with the Chinese Communist Party to end the civil hostilities. This issue may unite theto Chiang Kai-shek who is strongly opposed lo compromise, and wilh whom the Communists are unwilling to negotiate. The Communists would certainly achieve the initial and possibly the ultimate benefitsegotiated truce or Ihe formationoalition government. Although the Communists' problems of economic and political administration preclude immediate realizationommunist China through military means, uninterrupted continuation of present trends would appear to lead eventually lo that end.
The prospects for the present National Government might be altered by much more substantial US economic and military assistance. It is doubtful, however, that even under these circumstances the National Government couldecisive military victory or completely eliminate the Communist threat from China by military means alone. Furthermore, an extensive aid program would Involve considerable risks for the US. The National Government might become increasingly dependent on the US for continuous support. Close foreign supervision would be widely opposed by Chinese,
both In Communist end Nationalist territories as compromising Chinese sovereignty. Many Chinese resent US aid on the grounds that It merely prolongs the war and the life ot an unpopular and corrupt government To the extent that US assistance tended lo promote the stability of the National Government, such aid might be neutralized by Intensified activity on the part of the USSR to strengthen and encourage the Chinese Communists
From the very long-range view, probably the most significant aspect ol the current civil conflict In China is that It Is partong-term revolution the course of which will be essentially determined by Internal or national factors, and onlyimited degree by external pressures from the USSR. US. or any other foreign source. The mass of Chinese people are probably less concerned with the international relations and policies of the Communist or Nationalist regimes than they are with the desire for thorough going changes in the old social and economic patterns. This revolution has been in progress since the middle of Ihe ninclccnlh century, and its outcome willremain undetermined .for many years.
SEC/BET
Original document.
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