CHINA: Bad Government

The Nationalists were winning China’s Civil War. Prospects of Government control of all Manchuria (the sine qua non of a strong, independent China) were brighter last week than at any time since liberation. Yet the news from China was bad—appallingly bad. China was hurtling into economic disaster and political anarchy. Its causes: 1) Communist rebellion; 2) failure of the U.S. to send enough prompt aid; 3) the corrupt inefficiency of the National Government. Last week TIME Correspondent William Gray took a long, hard look at China. His report:

The old quandary—how much to talk about the bank on the verge of its collapse —seems to apply to China this week. To tell the truth might start a panic and wreck the bank for certain. Not to do so makes you a conspirator in the eventual bilking. The best hope in such a situation probably is to tell the truth in time to reorganize the institution before disaster.

The most important truth about China is that hardly anybody in China seems to retain any faith in the ability of the present Government to run the nation wisely, well or honestly.

Economically, China is decadent, living by an incestuous economy in which public officials sanction, if they are not leaders in, all depraving business practices of the day. It is an economy of printing-press inflation and Government-supported black markets. The inflation’s effect on national morale was seen today in Nanking, when China’s Supreme Court judges decided to strike for higher wages. They asked the Government to raise the basic pay of civil servants 1,000 times.’

Sovereignty for What? It doesn’t seem to matter much now whether a truce [with the Communists] will come or not. Real peace is nowhere in sight. The military prospect is predominance in the field by the Nationalists, and guerrilla disruption of communications by the Communists.

The question finally starting to bother Americans in China is “sovereignty for what?” The sovereignty so far is one of greed, ineptitude and Government preserved by force. And this is not a radical view any longer, but a realistic and fairly moderate one, expressible in polite and capitalist company.

Nor does this view neglect to give the Government, on the credit side, allowance for all obstructions dropped in its path by Communist sabotage or for the wide and tragic war devastation that hinders recovery. It is a view that considers the performance of the Central Government on its merits.

Grab & Run. An ardently anti-Communist American lawyer in Shanghai remarked to me the other night: “The Gov ernment is not a government. It is a dirty, venal lot of officials trying to get what they can while the getting is good. They have lost their confidence.”

Venality, it must be added, extends to Americans too. The desire to grab and run is almost universal in Shanghai today and transcends racial and national lines; the faith that prompts long-term investments is lacking. An American dentist, who came to practice in Shanghai, sold his dental equipment for more profit than he could make in a few years of practice, and went home. A foreign businessman who bought a house for 13,000 U.S. dollars last fall sold it recently for 136,000 and has gone home to retire. The first 1946 Chrysler sedan to arrive in Shanghai was sold by an ethically intentioned American dealer for $3,000, a comfortable profit. He is now feeling like a sucker, because it was resold recently for the third time for a reported $24,000.

The Central Government, on its part, has cornered the cotton market by nationalizing the cotton mills taken over from the Japs. Its loans enabled one private syndicate to control the rice black market in Shanghai. The Government also has tied up the market for trucks in China by “temporarily” halting importation of new trucks from America. The Government wants to sell some 15,000 trucks, originally designed for the Burma and Ledo roads and capable of an uneconomical four miles to the gallon.

Inside the Kuomintang, liberal elements —men unhappily without much power—are starting to demand changes. Founder Sun Yat-sen’s scholarly son, Sun Fo, President of the Legislative Yuan, asked Premier T. V. Soong this week to attend the Legislative Yuan’s meeting and answer questions on the economic plight of China. T. V. didn’t show up.

Then Sun Fo sent China’s highly regarded Kuomintang economist, Ma Yinchu, the Generalissimo’s old economics teacher (who was confined during the war for his criticism of the Central Government), on to Shanghai to continue the attack on “bureaucratic capitalism.” Before such semi-official and private organs as the Chinese Institute of Banking Studies and the Chinese Institute of Agrarian Economics, Ma spoke of the concentration of capital in the Government and the use of public funds for private speculation in commodities and gold—a practice that makes the scandalous a routine matter in China today. Shanghai’s Chinese press reported Friday that the police forbade Ma to make a subsequent scheduled speech.

Only a Good Government. What can be done to change all this, and what should America’s position be? Our position in China is undeniably bound into our global military strategy, increasingly so because of the worsening of relations with Russia. It is probably this fact that gives confidence to the Kuomintang’s bitter-enders. These men smugly ask themselves: What can the Americans do but continue to support the Central Government, in view of the ideological tie between China’s Communists and Soviet Russia? They assume that our strategic military position binds us to the Central Government, whether we like its attitude and its economics or not.

On the other hand, another suggestion is being discussed in Kuomintang liberal circles: the U.S. should get into Chinese politics deeply enough to set the Kuomintang house in order—or else the U.S. should get out. The Kuomintang has the military power to preserve itself now, but it cannot forever hold the lid on 400,000,000 unhappy people. If the Americans cannot somehow bring a liberal revolution within the Kuomintang, then it had better clear out. China’s Communists are not likely to be halted in their revolutionary tracks by anything but a good government.

The present Government has been dissipating, selfishly and with utter callousness, American supplies and money. A foreign shipping man tells U.S. friends this story: he acted as agent for the Government in shipping surplus American medical supplies from Okinawa. A week after these supplies were delivered to the Government, they turned up in his Shanghai warehouses as privately owned supplies, being held for black-market profits.

The Only Hope. China’s present Government is achieving neither peace nor economic welfare. How can they be achieved? Only, apparently, by recognition of the truth and by application of unprecedented American economic and diplomatic pressure to effect a housecleaning at Nanking.

It should be emphasized that there still are honest and liberal forces within the Kuomintang capable of undertaking reform. Shanghai’s new mayor, K. C. Wu, appears to be making an earnest effort to improve the situation in Shanghai. Wu’s program to cut rice prices this week brought the price down in two days from 60,000 to 51,000 dollars a picul at week’s end, and resulted in the arrest of” Jen Hsin-ya, section chief of the Shanghai Food Commissioner’s Office, on charges of irregularities in the discharge of his duties as administrator of the billion-(Chinese) dollar Government rice loan.

This offers an isolated illustration of the achievement possible, but does not alter the general ‘facts of China’s desperate situation. It must be recognized that any liberalized government inherits the currency mess, and what anybody can do with that is the terrible question. The problem is to achieve a housecleaning of such convincing merit that China’s essentially stable people will accept currency devaluation as a necessary step toward realization of good government. Then the reformed government must give the people an honestly good government and peace. That is the only long-range hope that I can see.