Vacuum

Mediator George C. Marshall had whisked U.S. policy out of China. In its wake was a vacuum which threw the Chinese Government into crisis. Last week in Washington, Secretary of State George C. Marshall watched the crisis develop without taking or preparing any action. Chiang Kaishek, however, found himself pressed too hard for impassivity; he struck out on several fronts.

Chiang's only definite success of the week was military. His troops in both northern and southern Shantung made good progress in the campaign to clear the Tientsin-Pukow railway line, one of the major links between northern and central China. The Communist position in south Shantung had been disorganized by the defection of General Ho Peng-chu, who had been first a Japanese, then a Communist puppet. Ho was captured by the Communists eleven days after he switched over to the Government with his 15,000 men; but the damage had been done, and the Nationalists were able to clear a considerable stretch of track.

On the financial front the Generalissimo had no such luck. In a long, tense session, Premier T. V. Soong wrote and Chiang rewrote a series of economic decrees intended to end speculation in foreign exchange. Chinese currency, which had spiraled up to 19,400 to the dollar, was pegged at 12,000. But the deeper trouble would be much more difficult to reach without U.S. help. Chinese foreign exchange balances are barely adequate to cover minimum needs for the next three months. China's textile industry, for example, faces collapse if it cannot get U.S. cotton on credit. If China's cities are not making pants to trade with China's farmers for rice, widespread starvation in the cities may result.

Without much hope, the Chinese Government was pressing hard in Washington for release of the $500 million Export-Import Bank loan, which has long been earmarked for China. In Nanking T. V. Soong tried to persuade UNRRA's fast-talking Deputy Director General R. G. A. Jackson to drop UNRRA's present relief program and instead to procure 1,000,000 bales of cotton and 200,000 tons of cereals for sale on China's open market at fixed prices.

Washington heard that Jackson, sitting that night in the U.S. Embassy in Nanking, wrote a cable outlining Soong's drastic proposals. When Jackson got to the end of the second page he could not find another sheet of paper. Impatient, he flipped the sheet over, wrote the last part of his message on the back. An Embassy clerk cabled only one side of the paper, which made it appear that Jackson had actually recommended Soong's plan. The resulting uproar in the U.S. press was a typical sample of how Chinese-U.S. relations have been worsened by petty misundestandings. Another example came last week when Chiang was quoted as having blamed the U.S. for China's crisis. A spokesman denied the statement, after it had been widely published in the U.S.

There was no question but that China's Communists viewed the plight of the Nationalist Government with relish. They liked U.S. no-policy even better than U.S. mediation. Departing from Peiping for Yenan by plane last week, Communist Commissioner Yeh Chien-ying cried: "Long live Chinese-American cooperation!"

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