894A.00/12–2349: Telegram
The Consul at Taipei (Edgar) to the Secretary of State
[Received December 23—4:22 a. m.]
865. Following in reply to Deptel 572, December 19, 7 p. m.:
1. Present popular support: Nationalist Government has no popular support in Taiwan. General opinion is Government as such no longer exists, power resting with untitled Generalissimo, southeast commander Chen Cheng, secret police. Only small group loyal followers remain.
Communist support believed limited to isolated small groups under flimsy organization. Infiltration from mainland continues, proselytizing is on increase using argument peaceful conversion only alternative to military conquest and chaos, but Taiwanese so far slow to react. Hsieh Hsueh-hung reported now in Taichung.
After 50 years of oppressive occupation Taiwanese are politically inarticulate, unorganized and unpredictable. Only Liao brothers can [Page 452] be called independence leaders and their reliable following in Taiwan most uncertain. They now advocate trusteeship. Other Taiwan “big names” most of whom in new Wu Government equally without solid backing. However, 2–28 revolt74 suggests constant possibility of sudden mass support for any movement favoring Taiwanese basic aims of relief from Kmt misgovernment, autonomy or independence.
Continued US aid to unreformed Kmt and supporting armies will delay or preclude Taiwanese self-expression and increase arguments of Communists. General diplomatic recognition of Mao Tse-tung and non-arrival US aid will lead many of all classes fatalistically to Communist side. Announcement of US aid clearly destined for Taiwanese Government combined with US military assistance to selected generals would quickly check local Communist conversion and strengthen Taiwanese Government for resistance. Local government such as Wu’s would receive greater Taiwanese and Chinese cooperation.
2. Nationalist Government’s internal unity: There is no unity in Nationalist Government now nor has there appeared to have been for some time past. However, Generalissimo through careful balances of power has turned this disunity to his advantage. No general now here is permitted sufficient strength of men plus material to insure successful coup. Probably only outside force promising secure future for participants could cause cooperative action to dislodge Generalissimo, who is government. Private assurances of subsequent continuing US support would weight scales. Only at last hour and on Generalissimo’s complete collapse when action could be called patriotic and not traitorous, some general might assume command despite remaining resistance.
3. Survival prospects: It is the general official opinion that survival is impossible without outside aid; resources to maintain military estimated sufficient for 6 to 9 months; with minimum aid such as 75 million President’s fund and ECA unused 90 million, another year could be added during time deterioration on mainland should permit comeback.
Taiwanese constantly fear defection Chinese soldiers. If US aid does not arrive soon, increasing defections this quarter can be expected as well as army officers and former government officials seeing no alternative.
4 (a). Effect National Government in Taiwan: Taiwanese reacted unfavorably to establishment of National Government in Taiwan, saying move makes island necessary objective of Communists particularly if military harassing of mainland from Taiwan bases continues. Also object to financial and food drain on Taiwan economy [Page 453] of military located here in numbers excessive for defense of island and justifiable only as return of unpopular Generalissimo and Kmt to mainland. Scattered charges US should object on basis Taiwan legal status and Cairo [Declaration?].
(b). Effect Wu appointment: Immediate result of Wu appointment is political confusion. Established elements and vested interests naturally fear and voice objection his “social revolution” selections of commissioners. His efforts to placate Taiwanese common people can be sabotaged, the enhances of which increase with further delay of US economic aid. ECA and US technical advisers believe Wu more understanding of and receptive to industrial integration, foreign trade simplification, modern economic rehabilitation than Chen Cheng. Unless sabotage efforts including currency black market flights and soldier disorders discredit him, personally believe he can obtain more general support than Chen Cheng had and accomplish more. However, many now differ this opinion.
5. Economic prospects: Unless unbridled military demands now being made upon its economy are curbed, Taiwan will go bankrupt within 6 to 9 months. Thus far indications are that current demand will be increased rather than curbed. In view of traditional Chinese military disregard of civil authority and advice, I believe that only strong direct pressure from outside would force military to pare their demands on Taiwan Treasury to point where they would not wreck the local economy, for such step would mean abandoning at least temporarily any thought of retaking mainland and require scaling military force down to size just sufficient defend island. Disposition of rapidly discharged soldiers would present problem. While provincial government has succeeded in keeping its own civil budget balanced, its revenue is just sufficient for that purpose (see mytel 816, December 1375), thus no part of current expenditures for military purposes, which in November were seven times civil budgetary expenditures, have been met by revenue. This military bill has so far been paid without serious inflationary effects by drawing on reserves. When reserves are exhausted there will be nothing to fill the tremendous gap between anticipated revenue and combined civil and military expenditures for Nationalist Government revenue from local customs, salt tax, et cetera, just sufficient its civil needs.
But even should military demands on the economy be scaled down to proportions which the island’s economy theoretically support on the basis of its present agricultural and industrial capacity to produce, the economy in its present state could not actually be expected to sustain them unless current assistance is increased or substantial amounts [Page 454] of private capital induced to flow into industry. Many of Taiwan’s key industries are now in doldrums due primarily to their inability to adjust to loss of mainland markets and source of supply. In order to compete in new (foreign) markets or be able to afford to buy supplies abroad these industries must increase efficiency so as reduce costs and improve products. This takes capital. The ability of provincial government to provide capital from its reserves is not only limited but is being rapidly reduced by the military drain. Thus unless ECA fills the gap the burden must fall on private capital. While it is believed that there is substantial private capital available to Chinese now on the island, such capital is not being invested in industry where it is vitally needed because of uncertainty of Taiwan political future. Furthermore, confidence in the ability of the Chinese to secure Taiwan against communism without outside help is so low that it is highly doubtful that any Chinese administration alone, no matter how reformed, could inspire the confidence of private capitalists sufficient to encourage them to invest the capital needed. Element of confidence can only be supplied by display of American support.
The economy of Taiwan is basically sound and it possesses the necessary physical elements to make it self-sustaining under normal conditions of peace and security. But only after military demands are directly related to the ability of the economy to pay and the confidence of the people in the island’s security is restored can these elements be so coordinated as to make the economy a going concern. Given these conditions the amount of material aid actually needed to put Taiwan on its feet would be relatively small.
6 (a). US military occupation: Generalissimo, generals and topmost officials could be expected to require face-saving formula with emphasis on support for eventual victorious return to mainland before accepting US military occupation. An unnegotiated occupation could expect some initial Chinese military opposition. However, US military control through advisors with authority is entirely feasible at this point and has been suggested by Chinese officials. Many highest Chinese officials have repeatedly requested maximum US military cooperation, even suggesting military condominium.
Over million Chinese civilians here look hopefully to temporary US take-over to save selves and what they have salvaged from mainland.
Mass of Taiwanese hate Kmt, fear Communists and would welcome US military occupation. For months past there have been recurring hopeful popular rumors that SCAP would take over, as relief from Kmt and step toward independence. More realistic ones have suggested [Page 455] Chinese armies and civil administration here be placed under SCAP supervisory control as deterrent to Communist attack. Expected Chinese military and official cooperation would eliminate need large bodies US soldiers.
(b). Trusteeship: Trusteeship idea is held by most Taiwanese as alternative to US or SCAP intervention. [Garbled group] independence group has recently admitted impossibility immediate independence and made alignment with trusteeship group as interim necessity. Self-concerned mainlanders here could be expected to accept trusteeship.
Opposition would, most naturally, come from Nationalist officials who would see in move loss of Nationalist face and probable event loss of Taiwan to Chinese. US military and economic controlling participation in local problems would be more palatable and is generally desired. In present desperation, Chinese officials would accept any proposed formula.
- See Foreign Relations, 1947, vol. vii, pp. 423 ff.↩
- Not printed.↩