In the meantime, as the PLA marched south, Li Zongren and the Guangxi Clique felt an urgent need to extend their authority to Taiwan. This tendency put Chiang’s relations with Chen Cheng to the test. In late April 1949, Li’s close advisor Qiu Changwei told U.S. Minister-Counselor Lewis Clark that an effective control over Taiwan’s resources was the key to the success of the entire resistance movement. Qiu said Li was planning to approach Chen Cheng in order to persuade Chen that it was in his best interest and that of China that he gave full support to Li, and not Chiang Kai-shek. Only if persuasion failed, Qiu said, did the Nationalist authorities “plan more forceful measures [to] remove Chen.”38 A few days later, when meeting Lewis Clark in Guilin, Li Zongren himself repeated the importance of controlling Taiwan, and he openly sought American assistance in this regard. Li revealed to Clark that Chiang Kai-shek had originally planned to go to Taiwan immediately after his resignation. But when Chen Cheng passed on a “casual remark” from the local American Consulate General in Taipei that the legal status of the island would not be determined until a Japanese peace treaty was signed, Chiang decided he could not retire to a place where China’s sovereignty might be questioned. Using this inside story as a helpful example, Li urged Washington to join him in pushing Chen Cheng to obey instructions from him for the benefit of the whole country.39
Chen Cheng certainly felt the pressure from Li Zongren and the Nationalist central under the Guangxi Clique. On May 16, Chiang Kai-shek sailed from Zhoushan to the Pescadores and stayed there for a week. Chen, instead of showing his usual loyalty by coming to greet and accompany Chiang, flew to Guangzhou to meet with Li, a move Chiang had tried in vain to prevent. The acting president allegedly warned the Taiwan provincial governor that he either hand over the gold reserves and silver ingots on the island or wait to be dismissed. Under severe pressure from the Guangxi Clique and, presumably, from the United States as well, Chen told Lewis Clark confidentially that all the resources would be placed at Li’s disposal so long as Li showed determination to continue the anti-Communist resistance.40 While at the Pescadores, Chiang, on hearing Chen’s words, became extremely anxious about Chen’s attitude and shaky position. He hastily sent word to Chen to the effect that he personally would not oppose transferring the reserves out of Taiwan if Li Zongren agreed to use them to fight the Communists. Chiang made a further concession by claiming that Li as the head of the state surely had the right to locate the reserves anywhere safer than Taiwan.41
In hindsight, Chen Cheng’s ostensible defiance of Chiang Kai-shek’s wish and his going to meet Li Zongren in Guangzhou in May 1949 turned out to be a crucial turning point in Taiwan’s fate. A rapidly worsening situation on the mainland forced Chen Cheng to have second thoughts about Chiang’s strategic territorial triangle. The loss of Shanghai as Taiwan’s crucial import-export market and entrepôt meant that a diversion of Taiwan’s trade market to Fujian, Guangdong, or even abroad to Manila and Hong Kong was now a necessity.42 In the meantime, Chen grew stronger in his determination to sever Taiwan’s currency tie with the mainland, as he saw this as a last resort to assure the island’s monetary stability. He even radically proposed that Chinese customs commissioners stationed in Kaohsiung and Keelung, legally under the supervision of the foreign-controlled Inspectorate General, be removed and replaced by heads of the conservancy bureaus of the two cities. Inspector-general Lester K. Little deemed such action a “death-blow” to the century-long maritime customs services system in China, and threatened to resign if Chen insisted on it.43
4.1 Chen Cheng (middle at the front row), Chiang Ching-kuo (first from right at the front row), and core members of the KMT Central Reform Committee in the early 1950s. In mid-1949, Chen helped stabilize Taiwan by defying the Generalissimo. (Courtesy KMT Party History Institute)
To stabilize Taiwan’s finances and economy, Cheng Chen insisted that some drastic measures be undertaken. To achieve this end, Chen needed to secure endorsement from the Nationalist center, despite its weakening legitimacy. Chen’s strategy proved to be a successful one. Having returned to Taipei after back-room negotiations with Li Zongren and other Nationalist high officials, on May 27, Chen announced four new measures to be introduced to regulate the island’s finances and economy. First of all, with Guangzhou’s consent, Taiwan’s foreign exchange would henceforth be under the direct control of the Bank of Taiwan. Second, Guangzhou agreed to allow the Taiwan provincial government more maneuverability to use the island’s foreign exchange. Third, Guangzhou agreed to allow the provincial government to use gold and silver reserves, foreign exchange, tax revenues, and locally stored state-owned materiel to pay for the central government agencies and personnel on the island. Finally, Guangzhou agreed to authorize the Bank of Taiwan to collect local taxes, thus allowing the provincial authorities to manage disbursement issues on behalf of the central government.44 With these new measures, Taiwan’s financial and foreign-trade autonomy was increased, the island’s budget deficit was expected to be reduced, and inflation could be prevented. Meanwhile, the provincial authorities were now having a greater say in the use of local tax revenues, and, more significantly, they were now given the right to handle all state-own materiel on the island, thus greatly enhancing Taiwan’s economic autonomy.
On June 5, the Taiwan Production Board was duly inaugurated to regulate the island’s foreign exchange and formulate its financial and trade (and, later on, industrial and economic) policies. The functioning of this new institution also marked the beginning of Taiwan’s gradual departure from its previous position as a part of the mainland Chinese economy.45 Ten days later, on June 15, a new monetary scheme was further brought up in Taipei. With the backing of 800,000 taels of gold reserves stored in the island, the Bank of Taiwan issued the “New Taiwan Dollar” to replace the old bank notes. A ceiling of 200 million New Taiwan Dollars was placed on issuance with sufficient reserves from the Bank of Taiwan to ensure a one hundred percent gold, silver, and commodity cover. In addition, the new notes would be pegged to U.S. dollars, rather than to the pound sterling, and a gold savings deposit program was created allowing individuals to deposit new notes in accounts that would return gold at maturity. Having cut its monetary ties with the increasingly chaotic Chinese mainland currency, Taiwan’s financial condition was gradually stabilized.46
Undoubtedly, Chen Cheng was wise enough to factor the situation on the mainland into his policies in Taiwan, even if this implied defying Chiang Kai-shek, his mentor.47 On April 23, Chen issued an order urging his subordinates throughout the island to oversee the reduction of rent prices from over 50 percent to a maximum of 37.5 percent of the annual yield of the main crops, a new land reform program that had officially been put forward in February 1949. The provincial government was determined to redistribute public lands to the island’s poor farmers and tenants at the expense of the landlords, with whom Chen Cheng had no connection.48 More crucially, it was a survivalist attempt to stabilize the situation and reassure the public, particularly tenant farmers who made up the bulk of Taiwan’s population, at a critical moment: Nanjing had just fallen to the Chinese Communists. To ensure an efficient policy implementation, Chen emphasized “severe punishments” would be carried out if landlords refused to cooperate.49
On May 1, when Hangzhou also fell to the Communists, Chen Cheng ordered the launch of perhaps the most comprehensive island-wide household investigation since the colonial period. As Chen claimed publicly, the purpose of the investigation was to “ferret out the hidden spies and strengthen public security.”50 This move was followed by Chen’s declaration of martial law on Taiwan on May 20, when the fall of Shanghai was imminent and therefore something urgent had to be done to stop the flood of mainlanders into Taiwan. Except Keelung, Kaohsiung, and Magong on the Pescadores, where the Taiwan Garrison Command now took control, the remaining port cities throughout the island were closed for security reasons.51 It was not until 1987 that the May 20 Martial Law on Taiwan was finally lifted.
T
HE GENERALISSIMO’S GLOOMY MOMENT
It is conceivable that what Chen Cheng had undertaken in mid-1949, including his stay in Guangzhou with Li Zongren, was primarily for the good of Taiwan. At the last minute Chen did not compromise himself with the Guangxi Clique over the reserve issue, but his personal relations with Chiang did not improve either. Uncertain whether Chen’s loyalty to him was still unchanged, and whether Chen would genuinely welcome his arrival in Taiwan, a confounded and worried Chiang waited on the bleak and barren Pescadores. Then, on May 21, Chen, unanticipated, flew to meet Chiang from Guangzhou, a pleasant surprise that had “eliminated the anxiety I have suffered in the past week,” Chiang confided in his diary that day.52 Yet the reality was that Chen’s genuine political intention remained ambiguous, and his attitude toward Chiang was remarkably cold. Chiang bitterly complained in his personal journal that many of his erstwhile military subordinates, particularly Chen, were now treating him with growing disrespect, arrogance, and impatience.53 On May 25, 1949, before departing the Pescadores for Taiwan, Chiang decided to go to Kaohsiung, not Taipei, as his next stopover. Whether at this juncture Chiang was apprehensive about his handpicked provincial governor is an interesting question; upon his arrival at Kaohsiung, Chiang’s first words to the waiting Sun Liren were, allegedly, “Am I safe here?”54
Chiang was probably physically safe in Taiwan, but in the following weeks, his relationship with the supposedly faithful Nationalist military leaders went from bad to worse. To safeguard the putative territorial strategic triangle in Southeast China, Chiang deemed it extremely imperative to create a new command structure encompassing Taiwan, the Pescadores, and other Nationalist-held offshore islands along the coasts of Zhejiang, Fujian, and Guangdong. For Taiwan to be an effective base of operations in such a strategic triangle, it was vital that the new command structure should operate independently from the Communist-beleaguered mainland. So Chiang was frustrated to discover that most of his former military subordinates were now uncooperative and unmoved about such a supposedly life-and-death military arrangement. General Zhou Zhirou argued that Chiang’s direct involvement in military affairs had ruptured the unity of the air force and demoralized the Nationalist forces. Zhou cast doubt on Chiang’s authority to command the forces, a question that an extremely embarrassed Chiang found it hard to answer. In the end, irked and humiliated, Chiang replied rather unconvincingly that, as a “revolutionary leader,” if not as a head of state, he still possessed supreme power over the Chinese Nationalist military.55 To many Nationalist military leaders, this was nothing but a chicanery.
Zhou Zhirou’s case was by no means the first and last. Sun Liren also defied Chiang by refusing to accommodate in his Fengshan headquarters Tang Enbo’s defeated forces recently retreating from Shanghai via the Zhoushan isles.56 Worse still, around late May and early June 1949, rumors began to circulate that the deputy commander of Taiwan’s provincial garrison forces, Peng Mengqi, having long been regarded as a staunch follower of Chiang father and son, had secretly flown to Hong Kong, where he was allegedly making secret overtures with local Chinese Communist representatives. Given Peng’s powerful command over 80,000 troops in Taiwan at that time, the American intelligence establishment, which also found this rumor nerve-racking, tried to verify Peng’s future political inclination, which was seen by the State Department as crucial to the fate of the island. At one point, agitated Washington officials were busy drafting secret plans to render support to Sun Liren so as to safeguard his powerbase in southern Taiwan in the event that Peng proved to be a turncoat.57
More ominous from Chiang’s standpoint was Chen Cheng’s refusal to lead the newly created command structure, called the Southeast Military and Political Administration, an organization responsible for coordinating the rapidly diminishing Nationalist military resources in Southeast China. Chen thought that he could never enjoy full authority as long as Chiang was behind the scene.58 Very likely, Chen was also wary of a negative response, not only from Li Zongren, but also from Washington, where some at this stage seemed not entirely discarded supporting Chen’s provincial administration but only if he chose to distance himself further from Chiang.59 It was not until two months later, in mid-August, that Chen finally agreed, albeit extremely reluctantly, to accept the post. Chen’s acceptance came only after a humiliated and infuriated Chiang thundered at him in a showdown.60
Adding to Chiang’s frustration about his relations with the unruly Nationalist military chiefs was the arrival of a bleak message, which confirmed that the United States had political designs on the island. On June 15, 1949, Chiang received two urgent letters from his wife that Washington was formulating feasible plans to place Taiwan under the trusteeships of either the United Nations or the SCAP headquarters in Tokyo.61 Madame Chiang was by no means just scaring her husband. In early June, MacArthur wrote to George Kennan, then director of policy planning in the State Department, expressing his concern that Dean Acheson was paying so much attention to Europe that “the oriental masses” might gather the impression that Washington was relaxing its commitment “to hold our Far Eastern position.” Shortly afterward, the general received a letter back from Kennan related to “a project of the greatest delicacy concerning which some of my associates and I have great interest.”62 Not entirely coincidental, around this time some within the CIA were talking about “the assassination of an [unnamed] Asian leader,” causing much disturbance in Washington’s highest intelligence circles. The issue later went up the chain of command at the agency, where the assistant to the director of special operations openly denied having such a plot.63
Whether or not there was a genuine plot to assassinate Chiang, an undeniable fact was that, from mid-1949 on, SCAP’s criticism of Chiang escalated. In September, for example, MacArthur told a congressional delegation visiting Tokyo that Chiang was surrounded by corrupt officials including corrupt generals, adding that Chiang was “a highly intelligent individual but knows nothing of the art of war.”64 Later on, when MacArthur responded to a request for guidance from the publisher of the New York Times, whose editorials were favorable to Chiang, he commented by saying that Taiwan’s defenders could not be counted on long to resist a determined enemy’s amphibious assault. In the meantime, sources began reporting that MacArthur was contemplating the government “he is to establish on Taiwan” after Nationalist underlings urged Chiang Kai-shek to “take a trip abroad,” causing political rumors to spread quickly in Taiwan that the SCAP takeover of the island was imminent.65
Back in Taipei, although not totally surprised by the American intention to exploit Taiwan’s undefined legal and sovereign status to protect its interests, Chiang nevertheless felt deeply hurt and betrayed, and in the days that followed he was unable to come up with a clear response to this stunning message.66 Five days after receiving Madame Chiang’s secret messages, Chiang wrote to MacArthur and expressed his resolution to make “a last-ditch defense” of the island. Chiang invited the American general to conduct a joint defense operation in this endeavor, but nevertheless reiterated that the island should never be handed over to the United Nations.67 Strikingly, although outwardly standing firm on his position on Taiwan, Chiang had already begun to have second thoughts about his overall anti-Communist endeavors both on the Chinese mainland and on Taiwan.
Indeed, by the middle of 1949, the military situation of Taiwan looked extremely somber. A confidential dispatch by the British consular post in Tamsui reported in May 1949 that certain Nationalist leaders were so skeptical about their ability to hold the island against the Communists for any length of time that they were unwilling to take positions that would impair their relations with a future Communist regime.68 Shortly after the fall of Fuzhou, Sun Liren did not hesitate to remind Chiang that the PLA could land 200,000 soldiers on Taiwan from an armada of 1,000 junks within twenty-four hours, and the island’s fate would be doomed if no further foreign materiel was forthcoming.69 As the situation on the mainland continued to decline, the American
s were speeding up their maneuvering over the island. In May 1949, as the British observed, a newly installed large wireless station within the U.S. Consulate General in Taipei began direct communications with Washington.70 Many U.S. military personnel, including air, naval, and military attachés, consecutively arrived in southern Taiwan to get in close contact with Sun Liren and his headquarters, and, as the British put it candidly, their arrival definitely bore sensitive political implications.71
It was a defining moment for Chiang Kai-shek. Within the Nationalist hierarchy, he now seemed to have very few civil or military subordinates to count on. Outwardly, the United States was exploring possible ways, notably Taiwan’s unsettled legal status, to prevent the island from falling to the Communists. The situation ahead was fluid and uncertain, putting Chiang again at a critical point. As Taiwan was by no means completely safe, searching for other possible power bases on the mainland had become a difficult yet inescapable choice for him.
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Last Gasp on the Mainland
Accidental State Page 12