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10/26/1948 - Civil War; Communist Progress; Nationalist Deterioration by Albert Ravenholt

INSTITUTE OF CURRENT WORLD AFFAIRS Broadway anslons Shanghal China October Walter S Rogers Institute Current World Affairs Fifth Avenue New York N Y Dear Rogers This letter departure regular reports I think agree situation demands Duig several years there consldeable loose about collapse Chinese Central Government The state Created helped obscue developments month This I learned among others whose judgment I tested earlier years The feeling gloom frustration impending chaos which occupies minds servants cabinet ministers Nanking unllke anything I Vhen officials present Chinese Central Government Chungking times dejected still looking constructive solutions Now fighting Among milltay situation takes precedence everything Conservatively figured Nationalists combat troops seventh their total force Communists during month Better informed milltay Communists Nationalist stronghold against which choose concentrate sufficient number their forces The underlying explanation involves entitle history China recent years But immediate reasons military For years China series thousands small skirmishes occasional llzIted battle fought usually countryside After fighting during July August early September Communists rather suddenly emerged concentrations groups armles columns first battles compare intensity those fought lsewhere during In early battles Liaoning Corridor South Jestern Manchuri Communists dlvsions They another divisions veteran combat troops eserve addition estimated second string troops farther Manchuria When Coasts Chinchow largest single known supply China where ammunition stockpiled winter hauling Nationalist garrison encircled Mukden In keeping advice ignored Generalissimo tylng evacuate troops anchuria He flying Mukden Peiping attempting enforce commands Mukden garrison failed orders relief Chinchow He apparently hopes shift toops North China before Communist armies Manchuria through Great Wall To require coordinated peration Nationalists carried through before But official Chinese National Defense Ministry remarked What difference which cities If toeps fight story And better qualified military agree happening The immediate military threat Nationalists Yangtze River Valley comes directions West Pinghan Railway which north Hankow Communist General Liu Po cheng about troops which appear prepared North Lunghai railway principally Shantung Province General Chen Yi approximately Communist troops primed supplies captured Tsinan The Nationalists scrapped barrel about troops which shoved north Yangtze River A foreign officer visiting front discussing possible plans attack Nationalist commander To suggested offensive Chinese General repli But Communists pieces Nationalist troops sometimes resis going front They sabotaged their trains order delay moving forward If ationaists fight plains between Yellow Yangtze Rivers should scene battles civil The remainin Central Government forces south Yangtze River Right looks Communists waitingoothe developments before attack The little people these parts military situation Central Government anything picture The thing economic financial anarchy It generated feeling desperation which words hardly describe The August reforms brought currency Gold Yuan ordered freezing prices It nationalized foreign exchange It seemed about month going pieces withspeed I imagined This harvest season should plentiful several months But present great number people gloomy prospect starving Fo black market failed provide alternative The shortage principally The Generallsslmo Gen Chiang Ghing obviously intentions understanding finance organized system informers which prevented economic demands setting aside government regulations Peasants local connunltles countryside hanging their refuse controlled price The responsible Chinese officials fought Central Government realistic regulations satisfactory results They estimate controls informer system removed today could gotten prevent The freeze pinched trade between interior Businessmen refusing their Shanghai their communities The shortage materials curtailing production which clear With August currency devaluation Government woteoffits entireoldnoteissueat 000goldyuan US official exchange In compliance official regulations people turned Gold Yuan US O00 O00 ThatGY O00 O00infreemoneysoonsetoff buying spree which stripped shops large cities People bought anything money The reforms called maintaining National budget which months would GY O0 short income Instead duing first months since Central Government expenditures totalled GY income GY O00 O00 This include additional GY600 O00 O00 paper money USISO O00 O00 turned government banks A black market foreig exchange sprouting again Those U S dollar although official still The engineered reform think possible devalue currency again Foreign exchange bullion assets Government total about US At report Government still number bills One overdraft Irving Trust about US O0 O00 second totalled US O00 angravlng printing currency The estimates clear total approximatelyUSIO O00 O00 This include considerable pivate holdings members government They registered appears dopped practice Politically people government continue through motions happening Underne several serious developments aping Even important letting known never really opposed working Communists The Communists negotiating independent local leaders walords props present government This includes several Natlonalst commanders After MaJ Gen hiang Ching cacked Shanghai Industlal groups representatives Communist areas survey possibilities there Conmmnlst leaders The important developments taking place Communist controlled North China The convening olltlcal Consultatlve Conference It pattern which mapped coalition government Chungking during early months General George Marshal truce efforts except Ghiang Kal The original plans Political Consultative Oonference called provisional oalition government Marshal Li Chi Kuomintang Revolutionary C ommittee Hongkong president Mao Tse chairman Chinese Communist Party Vice President The Christian General Feng Yu hsiang reported burned death Soviet Black become Commander chlef General Chu Teh Comunist military slated second command Evidence indicates Communists taking greater administrative structure present government Reports Communist areas indicate handle developing North China Manchuria Their organizers already They trying private businessmen sometimes landowners American missionaries caught Tsinan treated gloves encouraged continue their This picture general deterioration continuation earlier developments The difference during month ccelerating speed which there accurate measure The physical facts I mentioned little indication people But The government which Chiang Kai headed relied heavily milltary machine Vhat government armies Already there evidence Nanking control provinces South withering Some provinces objecting sending which necessary Nationalist armies bureaucracy That answers which I looking coming What I knows where United States China Respons American officials include Republicans D emocrats three possible courses action One U S China building collapses That includes evacuating diplomatic other establishments leaving those private individuals organizati remain their A variant would present government should retreat Canton Formosa Essentially prospect unless Washington D C figure policy I U S diplomatic establishment accredited country government No I talked could remain under pesent directive Chiang Kai decides skeleton government elsewhere A second alternative would United States bolster whatever regional provincial governments beyond Communist orbit Many pessimistic about could The experience feeding supplies which often rotted rusted wheeof number passed hands Communists discouraged plans building present government The third course action would remain physically where U S installationsnexist whatever government comes power Such policy would contrary announced objective Europe fighting Communism But would several advantages They prevent Russians coming directly again It might permit U S bolster whatever opposition developed Communists within coalition government ECA reconstruction projects started mainly South might provide pa2tern which challenged North They United States maintained number establishments vould provlda basis establishing normal elations Asia When course events Eastern Europe bought response I talked subject enormous China reglonallsm conmuulcatlons desperate shortage literate trained people would possible Communists thoroughly dominate China They extent which United States offered people wanted offer healthy competition Communists would happened Estintes United States country usually predicated statement depends required educate coming office after presidential election realities situation Right Republicans Democrats suspicious other In event looks changes Sincerely Albert Raveraholt Received New York