CHINA: Strategic A

“America’s predicament . . .” said foreign diplomats in Nanking over their tea last week, and smiled. Watching the ups & downs of Nationalist-Communist negotiations, they were gravely amused by a situation in which the U.S. “won’t come in fully and can’t get out.”

U.S. policy had sought to unite the Nationalists and Communists in a liberal coalition government which might serve as a bridge to Russia instead of a buffer against her. “America’s predicament” resulted from the difficulties of uniting two hostile powers. One of them (the Nationalist Government), for reasons deep in its history, was compelled to extend democracy with caution. The other (the Chinese Communists) was anti-democratic in philosophy and action. If any American could have achieved Chinese peace and unity, it was certainly General George Marshall. But the degree of U.S. failure was reflected in last week’s martial news from China.

To Chiang Kai-shek’s demand that the Communists “withdraw from areas where they threaten peace and obstruct communications,” the Yenan Communist radio retorted: “What Chiang means, in a nutshell, is ‘Countrymen, prepare for slaughter; it is all for your own good.'” The Communist answer: a “mobilization” call (for an army of 1,000,000 regulars, 2,000,000 guerrillas) and announcement of a “provisional supreme administration for democratic [Communist] Manchuria.”

Deep in Communist territory to the north, 24,000 Nationalist troops held out in the ancient fortress town of Tatung (now an important rail junction) against a month-long siege by 80,000 Communists. In Jehol, Communists said that Chiang Kai-shek was massing for a drive against Chengteh.

Center of Impact. Last week the focus of fighting was along the east-west Lunghai Railroad. There Communists had surged south to capture Kaifeng, and 90 miles of track. Nationalist armies counterattacked, and pushed the Communists off the railroad east of Kaifeng.

Most Americans, unfamiliar with Chinese geography, found China’s war completely baffling. Its ultimate strategy hinged on control of China’s arterial railroads. Like a huge capital A, these trunk lines run from Peiping (at the northern apex of the A) southward to Hankow and Nanking. The bar across the A was the Lunghai Railroad which meandered from Sian, in China’s far west, to Laoyao, a minor port on the coast. For Nationalists and Communists alike, control of this A was a strategic necessity. Through its two-way gate Nationalists could move to conquer and hold Northern China. Communists hoped to pour through it to conquer the Yangtze Valley. But if the A was the key to Peiping and the Yangtze, the keys to the A were Suchow and Kaifeng, where the Lunghai Railroad crossed the north-south lines. This was the meaning of last week’s battles for Kaifeng.

On the brink of national war, the Nationalist Government moved to strengthen its economy; it drastically devalued the Chinese dollar (from 2,020 CN dollars for one U.S. dollar, to 3,350 CN). The new decree meant that China’s claims on the rest of the world’s rice, cotton, gasoline, locomotives and manufactured goods were suddenly cut by more than a third, while the rest of the world’s claims on China’s tea, tungsten, tung oil, silks increased to the same degree. Premier T. V. Soong and Central Bank Governor Tsu Yee-pei, a highly respected official, had decided to risk further inflation inside China in order to promote Chinese exports with which to pay for the industrial goods which China needs. The devaluation was necessary to bring the international value of China’s currency somewhere nearly into balance with its domestic purchasing power. After one week of operation, the gamble seemed to be working: imports nearly doubled in price, domestic prices went up less than 10%. Rice, the pacesetter for all Chinese prices, steadied at pre-devaluation prices. For the first time since World War II ended, Chinese manufacturers began to talk about producing.