893.00/6–1949: Telegram
The Minister-Counselor of Embassy in China (Clark) to the Secretary of State
[Received June 20—12:25 a. m.]
Cantel 613. Chu Chang-wei confirms agreement Li Tsung-jen to creation “policy committee” of Kmt. Li became convinced, he says, that Generalissimo would not come Canton and that he (Li) could control situation better through small policy committee with him as acting chairman than he could through existing political committee and standing committee of Kmt, in neither of which does Li have chairmanship and both of which are packed with articulate reactionary Kmt. Li plans use this policy committee as channel his control government activities. As indicative inertia present day Canton is fact that committee, although agreed to over 2 weeks ago, is still not organized and does not function.
Chu says Hu Shih has turned down offer be Minister FonAffs and that Chang Chun has refused position Minister without Portfolio. He says Li agreed appointment Yen Hsi-shan largely to please C–C clique.
Chu says Hsu Kan phoned from Taipei yesterday saying he would accept Finance Ministry and was returning Canton immediately. That indicates to Chu that Generalissimo has promised treasure. He shook his head, however, and said Pai Chung-hsi still had insufficient money pay his troops.
Chu confirms that Liu Fei visited Canton and saw Li Tsung-jen. He insists Liu Fei was not bearer proposals from Communists and that Li is not considering peace. Chu says Liu Fei and Huang Shao-hsiung with whom Chu had many conversations in Hong Kong are both most pessimistic over situation and he admits that they advocate peace. In spite of Chu’s protest to contrary and his unqualified statement that Li and Pai Chung-hsi will fight to the last, there seems possibility Liu Fei did, in fact, bring Communist proposition. While Li may be unwilling consider peace this state he may think differently as disintegration continues and should that day arrive when he and Pai have their backs to the wall in Kwangsi they may be more susceptible to Communist offers.
Sent Department, repeated Nanking 411, Shanghai 349.