Two crucial events occurring at this juncture pushed a stubborn Chiang Kai-shek, who would otherwise refuse to yield to domestic and diplomatic pressure, to consider retreating from the political scene. The first was the election of the president of the Legislative Yuan, a move that only deepened the fractures in the KMT party. Chiang favored party nominee Li Peiji, a core member from the CC Clique who was staunchly rightwing and strongly opposed to Li Zongren’s peace overture with the Communists. Other major factions within the KMT, including the Political Science Clique, the Youth Corps, and regional cliques, instead supported Tong Guanxian, and Li lost the election on December 24. Chiang, of course, was humiliated and maddened. The implication, moreover, was that the party apparatus was now completely out of his control, and his anti-Communist stance gained little support more than the extreme-rightist CC Clique.72
On the day after the Legislative Yuan election, Chiang Kai-shek learned that his instructions to the Chinese Navy a week before to transfer the Nationalist 2nd Army stationed in Sichuan eastward, where it could safeguard the Lower Yangtze Delta, were categorically opposed by General Bai Chongxi. Disagreeing with Chiang’s intended troop maneuver, Bai instead ordered the interception of the navy warships carrying the troops in Wuhan, where the Guangxi general’s Central China Bandit Suppression Headquarters was located. Realizing now that the strategically critical Central China front was in the hands of General Bai and his Guangxi armies, Chiang backed down and humbly withdrew his earlier instructions.73
With his political and military power rapidly slipping away, Chiang’s retreat from the political arena became inevitable. On January 14, 1949, Mao Zedong issued his conditions for peace, a harsh “eight-point proposal” which demanded, among other things, that Chiang Kai-shek be put on trial as a war criminal, the Nationalist armed forces be integrated into the PLA, and the Nationalist government be abolished. Chiang refused to accept these conditions, and on January 21 “retired” (yintui) from the presidency. Li Zongren succeeded him as acting president and opened formal peace negotiations with the CCP.74 At the turn of 1949, as looming crises were threatening his political career and even the regime he had led, Chiang encountered his gravest critical juncture since the end of World War II. Whatever decisions he would make or dismiss, and whatever actions he would take or drop, would generate strong repercussions in the development of China’s political landscape, creating far-reaching impacts on the fate of Taiwan.
LIVINGSTON MERCHANT GOES TO TAIWAN
With Chiang ostensibly out of the way, Washington revealed its determination to prevent Taiwan from falling into Communist hands. For the American policy planners, finding potential regional leaders and/or governing groups to deal with, and thereby to secure American interests in a China without a strongman such as Chiang, was paramount. A National Security Council paper in early January 1949 (NSC 34/1) articulated the American aim “in a chaotic China” was to “prevent it from becoming an adjunct of Soviet power.” In pursuing this goal, top strategists in Washington felt it important to devise appropriate plans and to make timely preparations to exploit opportunities in all regions of China, while at the same time maintaining flexibility and avoiding irrevocable commitments to any one course of action or to any one faction.75 As a result, at least for the time being, it was not entirely unreasonable that the strategists thought Northwest China under General Zhang Zhizhong and the Ma Muslims, and Sichuan, Yunnan, and Guizhou provinces in the southwest under their respective provincial leaders, might remain safe and secure from the Chinese Communists.76
In South China, most of which was free from immediate Communist threats, T. V. Soong remained at the top of the list of leaders in whom Washington had great hopes, and the reason is not difficult to discern. Since early 1948, Soong had been in contact with Li Jishen and other anti-Chiang Kai-shek politicians from the Guangdong Clique to determine how and where they could collaborate to secure a noncommunist South China. Presumably with tacit permission from Chiang, Soong at one point was engaged in incorporating as many dissident Nationalist regional politicians and militarists as possible into his provincial administration. By so doing, Soong sought to expand the social-political base of what appeared to be the KMT’s last stronghold in South China, which would now encompass various factions and cliques.77 On the eve of Chiang’s retirement, James Brennan, Soong’s contact in Washington, informed him that because of Soong’s outwardly liberal image, the U.S. government would “work out with strong adherents here” how to save this region, a goal that was “essential to U.S. interests.” Brennan further stated that powerful elements in Washington’s military circles were working on “another AVG [American Volunteer Group] operation to help gain time [to] organize the Yangtze line,” adding that in every important discussion Soong was the most respected Chinese leader, of whom the “most is hoped.”78
On December 29, 1948, three weeks before his retirement, Chiang Kai-shek appointed General Chen Cheng as the new provincial governor of Taiwan. A loyal subordinate and comrade of Chiang since the mid-1920s, Chen was regarded by the American consular staff in Taipei as one of the few generals in whom Chiang had complete and absolute trust, and so it was assumed his appointment to Taiwan indicated Chiang’s plan to make the island his home base.79 Such speculation grew during the first weeks of January 1949 when Chiang Ching-kuo was asked by his father to take charge of the KMT party mechanism on the island. In addition, various American intelligence sources around this time indicated that Chiang had secretly managed to transfer the government’s gold and silver, and foreign exchange reserves worth $506 million in total, out of Shanghai. Although their exact destination was unknown, Taiwan was considered to be the most likely.80
Whether Chiang Kai-shek had long designated Taiwan as his last territorial refuge, as most experts on modern Chinese history maintain, is a question that remains open to debate.81 On January 17, 1949, Chiang wrote to his wife in the United States, informing her of his imminent resignation. Meanwhile, Chiang stressed that the central government “will not be moved to Taipei, nor was he planning to go there.”82 Madame Chiang, still struggling to lobby for possible U.S. aid to prolong the Nationalist regime in its eleventh hour, strongly disagreed with her husband’s decision. Instead, she repeatedly urged Chiang that if he believed the safety of Nanjing was now in serious question, then he should move the Nationalist power base either to Taiwan or to Guangdong so as to continue the fight against the Communists.83 Her advice fell on deaf ears, as at this juncture Chiang still seemed quite optimistic about making an effective defense south of the Yangtze.84 In addition, by early 1949, despite the Communist lack of amphibious capacity, for Chiang and many of his core followers, considering the scarcity of natural resources and the possible defections and subversion from within the local Nationalist apparatus, Taiwan did not appear to be safer, either politically, economically, or militarily, than Guangdong or other southern provinces on the mainland.85
Nevertheless, to many outsiders, as Chiang’s resignation loomed toward the end of 1948, he seemed to have chosen Taiwan as one possible territorial refuge.86 Seeing that Chiang’s influence now began stretching to Taiwan, officials in Washington tended to believe that the island would inevitably be embroiled in China’s civil war. In early February 1949, trans-departmental discussions on the U.S. position toward Taiwan were heatedly underway in a National Security Council session.87 In the end, the State Department and Defense Department chiefs both recognized Taiwan’s strategic importance, and thus Washington decided it should seek to develop and support a local non-Communist Chinese regime that would provide “at least a modicum of decent government for the island.” It was also agreed that the United States should “seek discreetly to maintain contact with potential native Taiwanese leaders” with a view to being able to make use of a “Formosan autonomous movement” should it appear at some future date to be in the U.S. national interest to do so.88 They also reached consensus on a telling reality: If and when a Chinese coalition governm
ent was formed between Li Zongren and Mao Zedong, Taiwan would be governed by a Chinese central government jointly run by the Communists. Washington concluded that it was urgent to do something to prevent the island from being taken over by the Communists.89
The Joint Chiefs of Staff strongly opposed an overt military commitment in Taiwan as the disparity between the U.S. military strength and its global obligations made the employment of any armed force on the island next to impossible. Nevertheless, they agreed that “some form of military support” should be made available to assist the vigorous implementation of Washington’s diplomatic and economic policy for “developing and supporting a non-Communist regime in Taiwan.” In conclusion, the military establishment urged the State Department to strengthen and increase its diplomatic representation on Taiwan and immediately send a high-ranking officer to Taipei, to approach the governor of Taiwan along those lines. After the governor agreed to cooperate with the United States, Washington would render economic and technical support designed to maintain a viable and self-supporting economy on the island.90
Dean Acheson, Truman’s new secretary of state, who hitherto knew little about the situation in Asia, green-lighted the implementation of the aforementioned policy. It was within this context of a newly formulated strategy toward Taiwan that the mission of Livingston Merchant was carried out. Merchant was not one of the State Department’s China hands. From 1945 to 1948 he had served as an economic advisor in the U.S. Embassy in Paris, and his first assignment in China was as counselor of the American embassy in Nanjing. Still, he was dispatched as that very “high-ranking officer” to Taiwan in accordance with the policies set forth in Washington. By the last week of February 1949, Merchant was already in Taiwan, where several other U.S. military and economic officials were also visiting.91 His task was twofold. First, he would investigate the political situation on Taiwan, determine who was running the island, and assess whether that leader would be able to provide at least “a modicum of decent government” and be willing to cooperate with Washington. Second, he would assess the Taiwanese independence movement, which was reported to be active on the island.92
While in Taipei, Merchant initially planned to meet with Chen Cheng and pass on Washington’s messages to him. However, at the last minute, Merchant avoided approaching the governor, whom he portrayed as seriously lacking the political abilities that the island administration needed. Instead, on March 6, 1949, Merchant cabled Dean Acheson, recommending that the State Department instruct Ambassador Stuart to encourage Acting President Li Zongren to replace Chen with General Sun Liren as soon as possible.93 David Finkelstein argues that Merchant thought it unwise to approach Chen because Chen’s governorship was insecure at this moment.94 This is probably true, although it was more likely that Merchant had been deeply influenced by his close associates at the Economic Cooperation Administration (ECA) mission in China, who almost unanimously disliked Chiang Kai-shek. Chen Cheng, having been labeled as Chiang’s man, thus became a scapegoat.95 Another reason for this last-minute change of attitude was quite obvious: Just a few days before Merchant’s arrival in Taiwan, General MacArthur invited Sun to visit Tokyo for a personal meeting. A SCAP chartered plane was specially arranged to carry Sun and his entourage between Taiwan and Japan. The signal seemed clear: It was Sun, rather than Chen, who was SCAP’s favorite on the island.96
Dean Acheson had no doubt about Sun Liren’s integrity, capability, and disposition toward the United States, but he nevertheless worried about Sun’s lack of administrative experience.97 In response to the secretary of state’s doubts, Merchant emphasized that Sun possessed the political courage and ideal nature for Taiwan’s governorship, as he was effective and liberal, and more crucially, Sun was a maverick “not so bound to Chiang Kai-shek” as to permit Chiang to turn Taiwan into his private island citadel if the Communists ultimately occupied the entire mainland. With such a possibility looming large, Merchant strongly suggested that no economic aid project be granted until Chen Cheng was replaced.98
Livingston Merchant, certainly not a China expert, knew much less about Chinese Nationalist politics than he pretended, and his observation and conclusion might not be entirely accurate; but his assessment was fair enough to create a stir in Taiwan’s military and political circles. Extremely insecure about his position in Taiwan, in late March 1949, Chen Cheng rushed to meet Chiang Kai-shek in Xikou, the Generalissimo’s hometown in Zhejiang Province, and detailed the “ongoing American intrigues” surrounding Taiwan.99 In early April, Sun Liren, whom Merchant deemed as “not so bound to Chiang,” also flew to Xikou to meet with Chiang. Fully aware that Sun was now unmistakably the Americans’ preference, Chiang reportedly showed him the special courtesy of accompanying him quite some distance from the house when Sun left. Chiang also encouraged Sun to go back to Taiwan and continue training the Nationalist army.
Shortly after Sun’s visit to Xikou, an anxious Li Zongren advised John Leighton Stuart that if the United States genuinely believed Sun was a better choice than Chen to govern Taiwan, Washington should negotiate with Chiang for a new arrangement. Li thought it useful for the Americans to approach Wu Zhongxin, a KMT veteran who admired Sun and had Chiang’s confidence. In the eyes of the Guangxi Clique, it was evident that Chiang had endorsed Sun, whose appointment as Taiwan’s new governor might attract support from both the United States and different factions within the KMT. Given Chen Cheng’s unique ties with Chiang, Stuart found it reasonable to argue that a Taiwan under Sun would be in the interest of the Nationalist authorities now headed by Li Zongren.100
By the spring of 1949, Merchant’s recommendation of not approaching Chen Cheng, thus indicating the cultivation of Sun Liren, seemed to have generally become a consensus both in Washington and the SCAP Headquarters in Tokyo.101 “If he [Sun] accepts, we shall have made a major military gain in dividing the Chinese forces now on the island,” as one piece of the State Department draft memorandum optimistically predicted, and “Chiang Kai-shek will be accorded the status of a political refugee.”102 However, the Chinese Nationalist political landscape was far more complicated than officials in the American embassy in Nanjing or in Washington could have visualized, and Chen Cheng’s political fortune was not yet sealed. The relationship between Chen Cheng, who still was at the helm on the island, and his professed mentor Chiang Kai-shek, was not as harmonious and intimate as outsiders would have perceived, a fact that the Americans would soon come to realize. As long as Chen remained strong on the island, he would have the support of some American strategists. Several key policies that Chen undertook in the months after Merchant’s tour in Taiwan clearly demonstrated that it was Chen, not Sun or anyone else, who played a major role in directing the island’s future. On the other hand, it was America’s professed intention to back Sun Liren as an ideal military leader in Taiwan (and K. C. Wu, a Princeton graduate, as a possible political leader on the island), which would mean a tragedy for Sun, the talented yet politically naïve Virginia graduate, in the decades to come.
4
Chiang Kai-shek in Eclipse
BEFORE TAKING HIS leave of the presidency on January 21, 1949, Chiang Kai-shek undertook a series of political and personnel arrangements that made his retirement indeed resemble a mere temporary expediency. In addition to anointing his Whampoa subordinate Chen Cheng as Taiwan’s new governor as a way to consolidate the island rear, Chiang also placed several of his trustworthy associates in key positions in areas south of the Yangtze. Zhang Qun and Zhu Shaoliang, his two fellow students back in the early Japan years, were made directors of the bandit suppression headquarters in Chongqing and Fuzhou, respectively, positions which gave them legal authority to command the local military in the southwest and southeast; Tang Enbo, another of Chiang’s trusted military subordinates who also shared the same Japanese military educational background, was entrusted to command the Nationalist garrison forces in the critical great Nanjing-Shanghai-Hangzhou area and was made responsible for the Yangtze defense
line; and Yu Hanmou, a Cantonese militarist who in 1936 decisively sided with Chiang, thus quietening an anti-Chiang rebellion by the Guangdong and Guangxi cliques, was assigned the task of heading the military in Guangdong and Hainan Island.1
While placing confidants in crucial posts south of the Yangtze, Chiang lost no time in moving national reserves from the Bank of China treasury in Shanghai to such relatively safer places in the south as Amoy, Keelung, and Guangzhou.2 Recent research by Wu Xingyong, the son of Wu Songqing, head of the Budget and Finance Directorate of the Nationalist Combined Services who was deeply engaged in Chiang’s secret business dealings, reveals that the total treasuries, including gold, silver, and foreign exchanges, transferred out of Shanghai between December 1948 and May 1949, amounted to 4 million taels (about 6.43 million ounces) of gold, equivalent to $500 million.3 Another secret transference to Guangzhou of 3 million silver coins then stored in Wuhan was attempted, but it was intercepted by Bai Chongxi, who apparently tried to place this piece of the treasury under his own control so as to stabilize the financial conditions in Central China.4 Chiang would later use the bullion and foreign notes at his disposal to launch Taiwan’s financial reforms and stabilize Taiwan’s new currency, to pay for those army divisions still struggling with the Communists on the mainland, and to prepare for his return to power.
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