BY MIDYEAR 1948 it was evident that the Nationalists would be swept out of North China. Chiang soon lost the great postwar advantages given him by American transport and supply, for he insisted on holding walled cities which the Communists promptly isolated by pouring through the countryside with fluid ease.
For a time it looked as though Chiang might be pushed aside by his own people. Criticism of his leadership was becoming open and direct. One of his most important rivals - General Li Tsung-jen - was elevated to the Vice Presidency. Intellectual leaders attempted to organize a non-Communist Third Force which could replace Chiang and the Nationalist Party and by drastic housecleaning in the Chinese administration regain the confidence and support of the American Government. Clearly fresh leadership was required if the Communists were to be kept out of South China. Washington considered the need to support the Third Force movement.
But if Chiang's military genius left somethiing to be desired, his capacity for intrigue was undiminished.
Only American intervention could save him now and keep him on top. A renewed indirect aid program was not enough. At some point the United States forces must become directly involved.
Obviously the Democratic Administration was prepared to write off the Nationalist regime and wanted no more to do with Chiang. An effort must be made, therefore, to persuade the American people to force the Administration to come to Nationalist aid. "If you can't change the policies, change the policy-makers."
How this might be done is well illustrated in reports of the Senate Foreign Relations Committee which probed the "Activities of Non-Diplomatic Representatives of Foreign Principals in the United States." The Committee was interested in the methods employed by foreign governments to achieve political ends within the United States. In passing he explored the activities of one of the public relations firms hired by the Nationalists to influence American opinion at all levels. The terms of the contracts brought to light in the Hearings spell out the themes to be developed, the methods to be used and the costs, which were high.
Whether the Nationalist leaders provided the general outlines of the campaign to influence American public opinion, or whether it was provided for them by hired public-opinion analysts and public relations firms within the United States is here beside the point. If General Wedemeyer's estimates were correct, the Generalissimo's family and other favored Chinese had assets within the United States of not less than six hundred million and perhaps as much as a billion and a half dollars, ample funds upon which to draw for a massive pro-Chiang propaganda drive.
It is not difficult to see that the overall campaign was organized to secure support by three influential interest-groups. Each was persuaded that aid to Chiang was necessary for its own good and each therefore was ready to use the others or to draw on them for support. These three interest-groups were (a) the American military establishment, (b) the Republican Party, and (c) the world of Christian missions and its supporting churches.
The American military establishment was rather easily persuaded. The American public had become painfully aware of Russia's growing military strength. After midyear 1945 the United States had disarmed and demobilized in pell-mell eagerness to turn from war to peace but the Russians were making it clear that nothing short of world conquest was the Communist goal, to be attained by guile and subversion if possible, or by force if necessary. As this ugly truth was realized an extraordinary sense of uneasiness disturbed the American people. Among the leaders in the American military establishment were a number of "activists" who were convinced that war with the Soviet Union was inevitable and imminent. In their view the sooner we came to blows the less prepared the Russians would be. And here was Chiang Kai-shek, a Generalissimo in his own right, offering us an opportunity to roll back Communists in China to the very borders of Soviet territory in Asia.
To preserve Chiang's face, he was openly hailed as an Ally, a military hero, and the one man who had stood up bravely and boldly against the Communists. Chiang himself asked only for arms and "some" support by sea and air. It is difficult to believe that any responsible American military officer really believed that Chiang could "go it alone" or intended to try. The advantages of having Chiang as a puppet were obvious; as long as he was the nominal Chief of State we could use his territory and his manpower. For propaganda purposes therefore the "activists" military leaders in the American establishment adopted the Generalissimo as their "hero," represented to the American public as a military genius being sacrificed by selfish and possibly pro-Communist American policies. Less impressionable military men in Washington were quite correct in noting that Chiang Kai-shek controlled the only "friendly" military organization in being in the Far East; however shabbily supplied and managed at the moment, the Nationalist troops might be whipped into shape if a good man were given a real chance to do the job.
Considered solely in military terms, it was important to keep Chiang's military organization in being and the way open to make use of any territory he might control. He had to be given public support.
The military had the blessing and extremely vocal support of the Party of the Opposition, the Republican Party which represented the second of the two major groups to which the Nationalists addressed their propaganda. The Republicans had been out of power too long. Party leaders were in a state of angry frustration. No domestic political question generated enough force to take them into the White House, but in the "Aid Chiang" theme they found the perfect made-to-order foreign policy issue. Given the state of near-hysteria induced by fear of Russian expansion, it was not difficult to relate the "Aid Chiang" issue to the larger question of national security. The irascible Ambassador Patrick Hurley had set the tone for attack on the Administration in his letter of resignation. The Nationalist defeat in China was attributed to intrigues and pro-Communist sympathies in the State Department. Anyone critical of Chiang ipso facto showed himself sympathetic to the Communists. So the arguments went with growing bitterness until in McCarthy's heyday it was possible for him to suggest that General George Catlett Marshal was a traitor, and that loyalty to Chiang was a proper test of loyalty to the United States.
The more fanatic Republican attacks upon the Administration suggested that if Chiang were not saved, the whole structure of American society was doomed. Prominent Republicans soon discovered the publicity value of a clear identification with the Chinese drama - the noble Christian warrior standing alone against Communism in Asia, the beautiful lady in distress, and above all, a Moral Cause.
By making aid for Chiang a moral crusade against the Anti-Christ in Asia, the Chiangs tapped a most powerful source of strength for the Nationalist propaganda drive. Every
American church missionary society in every parish in the land felt that it had a vested interest in the Chiangs' welfare.
For a century and a half the missionary world has been attempting to "save China" with pennies, nickels and dimes contributed each week to support missionary endeavor. Every contributor was encouraged to feel that he had a personal interest in the conversion of the Chinese to Christianity and to the American Way of Life. Centuries ago the Jesuits dreamed that if they could convert the Emperor the people at large would then embrace Christianity. In its new version, the Soongs and the Chiangs - China's most prominent families - were adopted as symbols of all that Americans desire for China - modern men and women professing devotion to Democracy and Christ. Nothing has ever been left undone to convince the American public that the Generalissimo and Madame Chiang are endeavoring with great personal dedication to transform China into a Christian country. Now - in 1948 - the godless Communist hordes, puppets of Moscow, were sweeping through the country. To withhold aid from Chiang would be a gross betrayal of trust.
Thus the Army, Party, and Church each had reason to believe that Aid to Chiang was of special importance to its own welfare. The assault upon the Democratic Administration's "disengagement" policies grew in bitterness and violence. Both the Army and the Party made extravagant promises and declarations; the very fate of the United States seemed to depend upon Chiang Kai-shek's survival.
The Generalissimo's own problem was fairly clear; how could he trade space for time to best advantage? He must hang on until the outbreak of World War III or until he could induce an open conflict between the United States forces and the Communist Chinese.
Chiang's major problem now was to ensure that he was not pushed aside by his own people, and that any further American aid to China should remain entirely within his control.
After most acrimonious debate at Washington the United States agreed to continue an aid-to-China program on a reduced scale as part of the worldwide program underwritten by the Economic Cooperation Act of 1948. An agreement was signed at Nanking on July 3.
Very soon it became clear that this would be aid to Chiang alone and would not reach any of his potential rivals. On September 22 a Vice Minister for Defense was sent to Shanghai to speed the distribution of enormous quantities of UNRRA relief goods and of American supplies which had been held in the warehouses. With this began a great movement to Formosa of materials of every description. Dismantled Shanghai factories, too, began to make the crossing. On Formosa they could be stockpiled beyond a water barrier, wide and deep.
But Chiang's aides were confronted with a truly difficult question. Had Formosan agitation for intervention affected American public opinion to a serious degree? Was there really any danger of intervention? Would the United States or the United Nations move to deny Formosa to the Generalissimo?
To test American reaction to the interventionist idea and the trusteeship proposals, Governor Wei dispatched Stanway Cheng of the Information Office for a quick trip to the United States in the autumn of 1948, there to renew old friendships among fellow journalists and to consult with public relations firms retained to "guide" American opinion.
Soon a spate of stories appeared in the American press, stories bound to evoke public debate if there were any substantial interest in the subject. They were of great diversity. Some were obviously pro-Chiang in character, and some were highly critical of the Nationalist Party and Government. Taken all together, a common theme was apparent. "What would the United States propose to do about Formosa if the Nationalists were defeated on the continent?" "Has anyone paid serious attention to the Formosan clamor for intervention?" These were the essential questions.
Prominent columnists soon broke into a rash of stories. How they were stimulated to this sudden interest in the intervention idea I am not prepared to say. Harold Ickes condemned any thought of intervention as a form of "new imperialism." Since his story obviously carried an indirect reference to me in an inaccurate story, I approached him on it. A usually reliable source, he said, had given him the story; he would check it when he had opportunity. Meanwhile, his informant had assured him that any suggestion that the Formosans preferred to be ruled by the United States or Japan was "ridiculous and untrue." "The idea of an autonomous Formosan state [Ickes wrote] is a purely synthetic figurine." In his syndicated column he asserted that the idea of an American trusteeship was an American device through which "American imperialists" desired to exploit the suffering of the Formosans. 
Drew Pearson took up the plebiscite issue, but Constantine Brown's commentary most clearly revealed the source and purpose of this sudden spate of articles. Under the heading "Formosa Wants Protection from the Reds" he built the case for an appeal to the United Nations and a program making the United States the Trustee. On Formosa, he said, the vast majority of people are Chinese and that in a total population nearing six million, less than 5 per cent were Japanese. (Obviously be consulted a prewar source when boning up on the subject.) He then continued:
The move, which is said to be only of recent date, sprang from the fact that the inhabitants of Formosa fear chaotic conditions in the event the Nanking Government collapses, and the area south of the Yangtse River becomes the scene of civil war while the northern area falls into Communist hands.
The movement to ask for a U.N. Trusteeship is said to have been first conceived by the youthful Governor Wei Tao-ming, close friend of Chiang Kai-shek, who was China's ambassador to Washington until 1946. 
There were other notes and commentary planted about the United States, telling of Dr. Wei's liberal plebiscite proposal. It was obviously a ploy to draw American opinion on the subject, for word of such a proposal by Dr. Wei was never heard on Formosa itself.
Wei's public relations agents were playing a rather safe game; at best a plebiscite held under Nationalist Party auspices would surely show a desire for continuation of the Nationalist regime under American protection, and at worst a plebiscite conducted honestly under United Nations auspices would reveal a fervent desire to be sheltered from the mainland civil war. It would then be time enough to insist that Nationalist leaders remain in authority under UN protection.
Late in 1948, former members of the UNRRA Team who had served on Formosa were scattered over the world. They continued to exchange letters in which the majority deplored Washington's indifference to the state of affairs and to the fact that the Formosans themselves had no voice and no means by which to make their views known abroad.
Because of this, a former UNRRA Reports Officer and Economic Analyst (Edward E. Paine) joined me in preparing a brief five-page mimeographed statement entitled "Will America Face a 'Formosa Problem'?" in which we set forth some background notes on the plebiscite issue. It was not a text for publication but a reference data sheet. This we mailed off to 165 editors and columnists across the country.  Soon we ourselves had the answer to Dr. Wei's problem. It was "No"; the view that no one would "ever" be interested in Formosa seemed still to be a valid forecast. Notes of thanks came back to us from several leading correspondents, but our effort stimulated only one editorial - in the Baltimore Sun, on January 3, 1949. Clearly, the United States had little interest in the problem of the Formosan people. Where, indeed, was Formosa?
Stanway Cheng having done his best to prepare the way, it was now necessary to make a really big play for American support. Time was running short for the Party and Army on the mainland.
Madame Chiang asked the American Government to provide a plane to carry her across the Pacific to the United States. She had urgent reasons to leave, for the Communists were closing in upon Nanking. She flew away on November 28, and on November 30 the American Embassy staff began to leave the capital city.
Madame Chiang had enjoyed an enormous success in wartime Washington.
In 1943 she had addressed the United States Congress and after crossing and re-crossing the country in dramatic appeal for American sympathy and support, had gone on to address the Canadian Parliament. That tour had been a triumph, but now, she discovered, things were very different.
On December 1 at Washington she was greeted by the Chinese Ambassador (Wellington Koo) and by her brother-in-law Dr. H. H. Kung. The State Department protocol office sent someone to greet her, but without enthusiasm. The magic was gone.
She had to wait nine long days before she was invited to tea by the President. There was considerable press notice, however, which helped to focus nationwide attention upon her mission. She asked all American Christians to pray for China. On the day before she was to be received at the White House it was announced in New York that an "anonymous Chinese Christian" had donated one million dollars to the relief and aid of American missionaries in the United States, including of course those thousands who had been forced to leave China and were at the moment telling of their experiences before missionary societies and churches throughout the land.
But Madame Chiang had not flown from Nanking to Washington merely for a cup of Presidential tea, or to encourage someone to give a million dollars to missions. She sought three things. She desired a clear-cut statement of continuing American support for the Nationalist Government. She sought material support on a massive scale, and she asked for an on-the-spot investigation of the situation in China to be undertaken by a top military figure.
It would have been tactless to name General MacArthur; this was left to the Chinese Foreign Minister (Wang Shih-chieh) then at Paris, who suggested "either General MacArthur or General Mark Clark." This politely gave the American President some latitude for choice, but not much.
Of far more interest, it was understood that she was prepared to offer the United States military bases on Formosa in return for these measures of assistance.
While Madame Chiang waited in Washington, a spate of rumors across the world predicted a Nationalist retreat to Formosa, but on December 8, China's delegate to the United Nations (Dr. Ting-fu Fuller Tsiang) issued a statement:
The Chinese Delegation herewith categorically denies and emphatically refutes the allegations that the Chinese Government plans to establish itself in Formosa, and that leading Chinese personalities refuse to transfer to Formosa, preparing "to seek to accommodate themselves to a new Communist regime in Nanking." 
On December 29, 1948, Governor Wei Tao-ming was abruptly dismissed. Within the week the Governor's Mansion was empty, stripped of its valuable furniture and curios. Dr. and Mrs. Wei left for Hong Kong en route to comfortable retirement in California.
Madame Chiang had been exceedingly busy in Washington and New York and it must be assumed that she found reason to be assured that the United States would not question Chiang's right to hold on to Formosa - if he could - even if he were defeated on the mainland.
To make the island secure, Chiang sent tough, loyal General Chen Cheng to govern there. Chen would see to it that Formosa was prepared for defense and he would show no quarter to any Formosan agitation for independence or UN intervention. There would be no further nonsense about plebiscites. This would be a military administration.
General Chen Cheng assumed office on December 29. There was no time to be lost, for things were going very badly. A great exodus from coastal ports had begun about December 15. This grew steadily in volume until it was estimated that as many as 5000 refugees were entering Formosa each day. Some who had unlimited resources and influence, for example the younger Soongs and Kungs, sent entire shiploads of personal property, industrial raw materials, dismantled factories and foodstuffs across to Keelung and Kaohsiung. The great majority made their way across the Straits as best they could, landing not only at the major ports but at the junk harbors, rivermouths and beaches wherever they came ashore. The confusion was indescribable and the pressure upon the native Formosans brought them again near the breaking point. There was also the problem of Communist agents entering in the guise of refugees.
General Chen closed the ports for a period of two weeks in February in order to establish a checking system and the Generalissimo's son Ching-kuo was brought in to manage internal security, taking for the moment the title "Chairman of the Taiwan Provincial Nationalist Party Headquarters." Henceforth (in theory) only certified military personnel, government officials, "legitimate merchants" and their families would be permitted to enter Formosa.
Chen Cheng's new Government was designed to give employment to the greatest possible number of refugees who had any claim upon the Party, Army or Government. For the most part Dr. Wei's people were retained in the local administration, but upon it there began to be erected the rough outlines of a so-called "national" administration. Many new Commissions and Committees came into being, offering nominal employment, place and perquisites to the members. In due course there were to be found on Formosa about 1600 generals, nearly 200 admirals and enough bureaucrats to govern the whole of mainland China. Room had to be made for all of them, and all had to be fed by the Formosan people.
As the Communists moved southward in China the country people either welcomed them as a possible relief or resigned themselves to a simple exchange of one military dictatorship for another. Scholars, military officers and civil servants had to make a great decision, some went abroad to Hong Kong to Southeast Asia, to Europe and America. Some went only across to Formosa, hoping that by a miracle they might soon return. Many declared for the Communists.
Among the prominent military and political figures faced with the necessity to choose sides was General Chen Yi, former Governor of Formosa and now, by Chiang's grace and favor, Governor of rich Chekiang Province.
In January, 1949, Chiang's agents discovered that Chen Yi was dickering with Hsieh Nan-kuang, the turncoat Formosan who had so bemused American intelligence officers at Chungking in wartime and had briefly represented the Nationalists at Tokyo during the Occupation. Now he was deeply committed to the Communists. It is alleged that Chen Yi was talking of a new form of Necessary State Socialism for Chekiang Province, under the Communist regime.
He was arrested on February 14 and flown promptly to Taipei. On March 3 the Formosans were told that Chen Yi had been seized and imprisoned and would be punished for his past misdeeds on Formosa.
The Formosans were skeptical, noting that Chen Yi had been rewarded very handsomely by Chiang and that he had been arrested only when it was discovered that be was about to betray his friend and patron the Generalissimo.
Generals Chen Cheng and Chiang Ching-kuo applied themselves to the internal security problem with ruthless thoroughness. No figures concerning arrests and executions can be considered reliable, but Formosan leaders estimated that at least 10,000 persons were arrested during 1949, some to be detained for harsh questioning, some to be sentenced to long terms, and some to die. The Governor himself is reported to have stopped in the street, ordered the arrest of Nationalist soldiers whose behavior displeased him, and on the spot to have shot them with his own side arms.
The security net spread wide, gathering in Communists, Democratic League members who advocated a "Third Force, Formosans alleged to have participated in the February Incident of 1947, and all known advocates of Formosan independence or UN intervention.
The year 1949 is remembered on Formosa as a year of terror. I shall quote only one letter addressed by an observant Formosan to a former UNRRA team member. This suggests the atmosphere at Taipei during General Chen Cheng's year-long administration:
Situation both on the mainland and on the island changed drastically since I wrote you last. The former Wei Tao Ming's administration was comparatively stable than the present one.
But except some puppet Taiwanese were appointed to several government high positions, very little improvement has been made as far as the economic situation and the political positions of the islanders are concerned.
Situation deteriorated very quickly especially after the last fall, when the government forces were collapsed on the fronts of the mainland. More than half a million refugees of the corrupted government officials rushed to the island; many divisions of troops were sent [here] for reserve and training. The Taiwanese have to feed these scraps of people.
The c.c. Clique and secret police nest in the island. Their activities are mainly directed against the Communists and the U.S. Trusteeship movement. After General Chen Cheng was appointed as the governor, he adopted very severe oppressive measures just as he adopted in Manchuria.
There is a recent example. About a month and a half ago, a conflict occurred between the students of National Taiwan University and Normal College, and the police. The governor was in Nanking then. The conflict was localized and settled in favor of the students by the efforts of Mayor Yu and many representative Taiwanese.
The Governor heard this when he returned, he got very angry, and told his men "these rascals should be punished severely."
He took the step on 6th of April. On the midnight of 6th, all the dormitories of all the National Taiwan University and Normal College were surrounded by many armed soldiers and about thirty students were arrested. Next day several secret police went to the dormitory of Normal College to make further arrest and a conflict occurred between the students and the police, which resulted in the arrest on block of about 300 Students of the Normal College.
The Normal College was ordered to be closed temporarily and reorganized.
Turning to the case of National Taiwan University the case was not so serious. Only about 25 students were arrested and the students held a meeting and decided not to attend lessons until those arrested were freed and their freedom guaranteed. The case was settled between the school and the governor that those who had no connection with the former conflict would be released and those who were suspected as offenders should be sent to court at once. 
Before the great flow of refugees was cut off nearly two million mainland Chinese had crossed to Formosa. This figure includes the Army conscripts who came under order and not by choice. (They were merely bundled aboard transports and put ashore on Formosa.)
For the most part the civilian refugees, too, had been fleeing before the tide of battle with little choice to make along the way. They looked with no favor on Formosa or the Formosan people. By tradition mainland Chinese considered the island a wild and barbarous frontier - certainly no place for a true Chinese to leave his bones, his ancestor tablets and family records, far from the family tombs. The Formosans, worst of all, had been tainted by the Japanese and were known to be hostile to mainland Chinese.
Thus by the very nature of things there could be little expectation that the refugees and the Formosans would easily intermix.
This was not always understood by foreign correspondents and American columnists; Clyde Farnsworth, for example, reported in the Scripps-Howard chain that "Formosa's indigenous Chinese have been drawn deeply into partnership with the mainland Chinese." The Formosans resented every new arrival. Too much had taken place in the past and the future seemed too uncertain. Other foreign correspondents were alert to the tensions created by this sudden weight thrust upon the island. A London Daily News correspondent noted:
The Formosans, who did not take kindly to the arrival of the acquisitive Chinese following Japan's surrender, remained unimpressed by Nationalist military might. So far as the future fortunes of Chiang's regime are concerned, the natives are uninterested ... Prices have risen nearly one hundred percent in the past three months ...
The Formosans are probably the only Orientals who wouldn't be sorry to see the Japanese back. That being impracticable, they would happily settle for the transfer of Formosa to General MacArthur's command. Rumors flood the island that should the Nationalist defense fall, the Americans will move to deny the island ... to the Communists ... 
A distinguished American correspondent (Tillman Durdin, of the New York Times) took note that
... robberies, depredations to property and other lawless acts [by the Nationalist soldiers] have not improved the attitude of the native Formosans to the mainlanders ...
The traditional Nationalist practices and policies applied to the administration of Formosa and the prosecution of the anti-Communist warfare from here are proving to have about the same effectiveness as they have had on the China mainland ...
One must admire Chiang's consummate skill in discomfiting rivals within the Nationalist organization who thought that by replacing him they might create a fresh administration, recover Washington's confidence and support, and make a successful stand against the Communists, south of the Yangtze. He neatly trapped and destroyed them.
Although at the beginning of 1949 the Generalissimo saw that the Nationalist military position was hopeless, he himself was not prepared to sue for peace. Instead he expressed a New Year's wish for a peaceful settlement and said that he would not stand in the way if one could be arranged.
He knew, of course, that there was growing dissatisfaction throughout the Government. On January 19, 1949, the Executive Yuan proposed a cease-fire and peace negotiations with Mao Tse-tung.
Two days later - on January 21 - he announced his retirement from the Presidency.
For the next thirteen months the world watched Chinese drama on the grand scale. It must be understood that one of Chiang's few important non-Communist rivals was General Li Tsung-jen, often critical of Chiang's conduct of the Government and of the war, and sometimes mentioned in Washington as a possible replacement for Chiang. In Chiang's eyes, Li had become a distinct threat to his own position. He had not been able to prevent Li's election to the Vice Presidency in April 1948. Now, thought Chiang, let him bear the onus of defeat.
From January 21, 1949, until March 1, 1950, armies and bureaucracies, generals and prime ministers, civil servants and foreign diplomats were moved about on the Chinese stage by a shadow-man in black. In theory Chiang was in retirement, but it was a retirement designed to prove that he and he alone represented Nationalist China.
General Li was not "President" but merely "Acting President," and upon him the history books would place blame for Nationalist defeat on the mainland. On the day after Chiang retired," Peking fell to the Communists.
Chiang's withdrawal from Nanking to the relative security of Formosa was carefully arranged to avoid any impression that he was fleeing from the enemy. As all proper sons should do, he first retired to the ancestral home at Fengwha in Chekiang, to "sweep the tombs of his ancestors." From there he went to Hangchow, then to Amoy, adopting the role of a retired scholar seeking a quiet place for meditation. He found it at last, at a beautiful hot-spring resort on Grass Mountain (Tsaoshan) just back of Taipei on Formosa.
It was an odd "retirement." On leaving the Presidency he reserved the privilege of resuming office at any time. He remained "Party Leader" (Tsungtsai or Fuhrer), and he continued to be Supreme Commander of the Armed Forces. This left very little to Acting President Li. In these offices as Party Leader and Generalissimo his orders superseded the wishes of a mere Acting President of the civil Government.
The American public of course--and most American leaders --assumed that he had actually retired and that General Li was the President of China.
From Grass Mountain a stream of commands went to military officers scattered over South China, and to Government and Party officials. These often countermanded the orders of Acting President Li who was attempting vainly to regroup Nationalist forces below the Yangtze. For example, at Chiang's order the National Government's gold reserves were flown to Formosa, beyond Acting President Li's control, and an immense variety of assets--including the National Museum treasures--were transferred beyond the sea frontier. They were beyond Communist reach, to be sure, but they were also well beyond the reach of Chiang's principal non-Communist rivals.
To hold the line in South China--if it could be done at this late date--Li desperately needed military supply, money and strong support from abroad. But shipments of American arms and relief supplies en route to Chinese ports were henceforth diverted by Chiang's order to Formosa, going to Chiang and not to Li.
Li was also harassed by Sun Fo, President of the Executive Yuan, who ordered Government offices to move to Canton, to be supported there by a powerful clique led by Chen Li-fu. But Sun himself was under heavy fire for mismanagement and peculation and in March was forced to resign. He left at once for comfortable exile.
He was succeeded by General Ho Ying-chin. On April 6 the American Ambassador reported to Washington that "The Prime Minister (General Ho) is still hoping to secure a silver loan from the U.S. and suggested a lien on the island of Taiwan, or its products, as security." 
In this and other dispatches the Ambassador documented Chiang's efforts to interfere with Li's attempts to consolidate Nationalist forces in South China and to deny Li military and economic supplies held on Formosa. On April 18 the Ambassador reported:
General Pai Chung-hsi called on me this morning to report that the Acting President, in view of the latest Communist demands, will propose to the Generalissimo that, peace being impossible, he (Chiang) should either resume full responsibilities of the presidency, or leave China, turning over all authority and national resources to (Acting President) Li Tsung-jen. By such steps the Acting President will seek to force the Generalissimo to end by a clear-cut decision the present state of confusion which the latter, himself, has created. 
Nanking fell to the Communists on April 24. Acting President Li flew to Kweilin, to Canton, and then ultimately far inland to the old wartime capital of Chungking. He did not dare visit Taipei.
Chiang meanwhile used Formosa as a base from which to make very sure that although he was "retired" the world should understand that he was "China." It was a bravura performance. He arranged to be invited to the Philippines and to Korea, proposing a Pacific Union or a Far Eastern Anti-Communist Alliance, speaking for China as if he were still Chief of State. On April 27, when Nanking had fallen and Shanghai was about to go, he announced with a straight face that be was personally determined "to suppress the Communist rebellion." On June 20 he announced that all seaports in Communist-held China were closed to international trade.
Shanghai, one of the world's largest cities, fell to the Communists on May 27. Chiang had entrusted its defense to a favorite, General Tang En-po, whose idea of a proper stratagem was to erect a wooden palisade - a fence of stakes - for a distance of some forty miles about the city. It was a grotesque illustration of Tang's capabilities and of Chiang's "military genius".
The Communist occupation of Shanghai marked an end to an era in Formosan history. Since midyear 1945 Shanghai had formed the island's principal link with the mainland and had dominated its economic life. The fall of the great port city broke this tie; henceforth Formosa would resume its position in the maritime world, linked with Japan on the north the United States across the Pacific, the Philippines to the South, and, through Southeast Asia, with distant Europe.
Shanghai was crowded with refugees who had not been able to make their way over to Formosa. On June 29 Chiang's planes, operating from Formosa, made a savage attack on the great city. Taipei described it as a successful strike against military targets; foreigners at Shanghai described it as an irresponsible general attack which did no damage to significant military objectives but killed and wounded hundreds of refugees in the crowded slums. European reporters noted that Chiang was in no position to follow through in any way and that the planes, fuel, and ammunition were all supplied by the United States. The Communists made great propaganda of it.
The British Government was deeply disturbed. Britain had vast interests at Shanghai which she hoped to salvage through negotiation with the Communists, and serious thought had to be given to the position and safety of the Crown Colony at Hong Kong. The Leased Territory shared a common land border with mainland China. What if the Communists at Peking demanded that London break with the United States in exchange for a guarantee of British interests in China and at Hong Kong?
The question of Formosa's legal status was raised in the House of Commons, and Taipei's standing in the United Nations became the subject of serious debate. How long would America's allies and friends be willing to go along with the pretense that Chiang truly represented China? Did Chiang in exile have a greater value to the United States than the British Government and members of the British Commonwealth?
The influential London Economist observed that since Formosa had been surrendered to the Allies and General MacArthur was acting as Supreme Commander for the Allied Powers - including the British Crown - perhaps it was time to bring about reversion of Formosa to the Allied Command pending the settlement of Formosa's status by treaty.
By midyear 1949 the Department of State at Washington was paralyzed; it had lost the initiative for policy-making here, for on the domestic scene it had little public support and it was at loggerheads with the military activists. It could not take a realistic approach to the problem in international discussions.
The Nationalists were in pell-mell retreat everywhere, but for the benefit of their American supporters they announced that they had "two million crack troops" ready to put into the field which lacked only the necessary equipment. On August 1 the Retired President announced that he had reestablished the headquarters of the Emergency War Council in his residence on Grass Mountain, far indeed from the fighting front. The Secretariat of the Nationalist Party had also established itself there in the safety of the Formosan hills. Formosa's Governor, General Chen Cheng, occupied a rather ambiguous position vis-a-vis the Acting President and the roving "Central Government" on the continent. His loyalties definitely were with Chiang.
Foreign governments were obliged to communicate with General Li, the de jure Acting Chief of State. Chiang on his part realized that he must remain closely identified with the de jure Government of the Republic of China. To this end he flew off from time to time to "confer" with the Acting President.
On August 20 the American Embassy in China was closed without ceremony. Far across the world in Washington the State Department released the controversial "White Paper" entitled United States Relations with China with which it hoped to document its reasons for bringing the China Aid program to an end.
October 1 brought the Communist declaration that Peking was once again the capital of China. It was a fateful moment, opening a new era in modern history. Russia at once recognized the new Communist Government which styled itself the People's Republic of China. The Nationalists promptly "broke off relations" with the USSR, and Washington as promptly reaffirmed its recognition of the Nationalists.
The Retired President followed Acting President Li everywhere and continued to send along a stream of interfering messages and emissaries, disrupting the Acting President's plans and issuing orders to his subordinates. Li moved the capital to Chungking on October 12, and Chiang in due course flew in "to confer." On November 30 Chungking fell. The headquarters were moved to Chengtu. Chiang flew there.
Li was helpless, as Chiang intended him to be. At last, on December 7, the Acting President left China for Washington to see what might be done to secure direct American help and to "smother" Chiang Kai-shek. President Truman was prepared to receive Li as Nationalist China's Chief of State. Perhaps even at this late hour, with Chiang out of the way, the United States could help Li organize an effective defense in South China.
1. Harold Ickes, "Man to Man," New York Post, December 6, 1948.
2. Constantine Brown, Seattle Times, November 19, 1948.
3. E. E. Paine & G. H. Kerr, Will America Face a Formosa Problem? December 15, 1948- 5 pp. mimeo
4. New York Times, December 9, 1948.
5. Letter to E. E. Paine (UNRRA) dated at Taipei, April 23, 1949.
6. Hessel Tiltman (London Daily News): "Formosa a Frail Gibraltar for China's Chiang." Reprinted in the Washington Post (Washington, D. C.), June 8, 1949.
7. Tillman Durdin, The New York Times, August 23, 1949.
8. [U. S. State Dept.) United States Relations with China, p. 404. Ambassador Stuart to Washington, April 6, 1949
9. Ibid., pp. 288-307.
10. Ibid., pp. 288-307- On- Chiang's betrayal of Acting President Li see especially pp. 302-304