The Far East

on the World Today

CHINA’S Communists continue to be the top exponents of the dual technique of close strategic liaison with Russia and an offsetting tactical freedom within their national field of operation. During the past year they have gained formidably in territory, population (they now claim 160,000,000), economic resources, and military power. The Communists estimate that it may be three to five years before they are victorious all over China. Moreover, the victory they anticipate is one in which they will have to allow for important non-Communist economic interests and social groups.

In the Marxist manner, they prescribe minute differentiations between classes, class conflicts, and class alliances. Party workers are told to make the poor peasants the backbone of their movement, but sternly warned not to antagonize more prosperous peasants. Maltreatment of “middle” peasants is condemned as “anti-Marxist and ultraleftist.” A reason for this warning appears in the admission that at least 30 and perhaps 40 per cent of the Communist-led troops are from “middle” rather than “poor” peasant families.

Private enterprise in production is rewarded. The rule is laid down that the land of a man who does not work the land himself may be confiscated: but even if he is a wealthy man, that part of his income from the land which he has reinvested in mining or manufacture must not be confiscated. Farmers who have become rich through their own hard work and good management must be treated very gingerly. Only that part of their land which is above the average holding of “middle” peasants can be taken for distribution to the landless, and then only with their consent.

New line-up for China’s anti-Communists

The Chinese government is not coming apart in face of the formidable Communist expansion, but its component elements are regrouping themselves. The outlines of three groups are now distinguishable. First, there is the hard core of the Kuomintang which refuses any compromise and relies entirely on American help. This hard core is made up of generals and politicians whose entire careers have been in the Kuomintang. Allied with them are business interests which have gone into politics, and bureaucrats who have made money out of government monopolies. Within this group many fortunes have been made by manipulating American aid both in money and goods.

Wealthy landlords from the “rice bowl” areas of the lower Yangtze and Hunan province complete the hard core. They belong to the families which have been cracking down on peasant risings ever since the Taiping rebellion a century ago. From their families come many of the officers of the Kuomintang; and from the families of the mutinous peasants under them comes an amazingly large percentage of the top leadership among the Chinese Reds, including Mao Tze-tung himself.

Opposed to the hard core is a group of Kuomintang veterans who, believing that neither side can win the civil war outright, have withdrawn to Hong Kong. They hope eventually to return to power through a coalition deal with the Communists. They count on an opportunity to pick up some of Nanking’s territories and take over some of Nanking’s troops after the Kuomintang falls and before the Communists can gather in all the spoils.

In touch with the Hong Kong group and nominally allied with the Nanking hard core, but not fully committed to either, is a loose alliance of war lords. Having troops and territories of their own, they are able to bargain with the Kuomintang now, and hope to be able to dicker with the Reds later. They are represented in the government by the Vice-President, Li Tsung-jen. As the former war lord of Kwangsi province he is the contact man who may later be able to line up dissatisfied war lords in South and Southwest China.

The immediate strength of the group rests on the Moslem war lords of the Northwest and on Fu Tso-yi, war lord of the Inner Mongolian frontier, whose troops are in actual fighting contact with the Communists. No Red propaganda has been able to shake the Moslem troops, who are bound to the families of their chieftains by clannish loyalty. As for Fu Tso-yi, his political support comes from a prosperous yeoman class of farmers along the Inner Mongolian frontier. Theirs is the self-made prosperity of frontier pioneers. They are hardened by bandit wars and land-grabbing forays against the Mongols, and they do not hire mercenaries, but send their sons into the army. Such troops can stand up to the Communist mixture of propaganda and warfare, but they will fight the Communists only to defend their own interests. If concessions are made to these interests, they can make a deal with the Communists.

The U.S. gambles on the Knomintang

American policy has clung to the theory of a shrinking periphery in China. Both the Army and the State Department believe that the Communists will continue to gain until the Kuomintang is hemmed into a base territory around Canton. They hope, however, that as the Kuomintang loses provinces, it will be forced to carry out reforms advocated by American advisers. It should then, according to the theory, become an efficient instrument of American policy, and might even become capable of recovering territory from the Reds.

This theory should at least be insured against two contingencies. The first is that the minimum reforms we want might be carried out either by the Kuomintang dissidents or by the semi-independent war lords before they are carried out by the hard core of the Kuomintang. Either or both of these groups might then join in a coalition government with the Communists before we can negotiate through our own nominees. The second contingency is that it is still possible for Chiang Kai-shek to abandon his extreme rightists, offer the Communists the best terms, and offer them first.

Japan gambles on American support

The “ new” American policies of rebuilding Japan as the workshop of the Far East and supporting South Korea against an increasingly red-hued North Korea are not really new. They are expedients forced on us by the failure of China to evolve either a stable and united government or an expanding market. Because the Japanese are now convinced that we have to use them, they are growing bolder in trying to get aid on their own terms.

Japanese industrialists feel confident that eventually America will have to liquidate Japan’s inflation. They are therefore holding back on the recapitalization of production. Instead, they are speculating in existing commodities, raw material stockpiles, and surplus machinery. Japan still has bigger war stocks of machine tools than its industry could use even if fully rehabilitated. The Japanese now hope to escape surrendering these machine tools as reparations and to be able to sell them in exchange for raw materials.

The fact is that American policy alone cannot make Japan a workshop without the consent of the countries which have the raw materials that Japan needs. These countries would rather obtain American capital for the industrial plant needed to process their own raw materials than see their raw materials converge with a flow of American dollars into Japan.

The political reaction to the proposed revival of Japanese industry has been especially violent in the Philippines. Iron ores, including high-grade ores, are now available in the Philippines to replace Japan’s former sources of supply in Manchuria and North China; but there is a strong nationalistic demand that industry should be brought to the Philippine ores, instead of allowing the ores to feed the industry of still deeply feared country.

Chinese capitalists complain

In China, it is notable that the resistance to the industrial revival of Japan is led by the Ta Kung Pao. This paper, the biggest and most independent in China, was founded by North China industrialists. It is hostile to the Chinese government’s trend toward industrial monopolies presided over by bureaucrats in government departments, and prescribes untrammeled free enterprise as the right way to revive China economically. Since free enterprise can never become independent in China in competition with a Japanese industry which America supports for political reasons, the Ta Kung Pao’s capitalist editors are driven to criticisms of America which often sound as if they had been received by direct wire from Moscow.

Chinese capitalists and Filipino would-be capitalists fear that Japan, deprived of its territorial empire in Northeast Asia, will try to create an economic empire by the infiltration of South China and Southeast Asia. In their eyes, there is a parallel between what Germany did after the First World War and what Japan might try to do now. Deprived of colonies after 1918, Germany turned to the economic, domination of Eastern Europe and the Balkans. In this region, the German policy was to retard the development of industries using raw materials needed by Germany’s own industry, and it was the control of these raw materials that enabled Germany to convert from disarmament to swift rearmament. Southeast Asia fears a similar economic infiltration by Japan.