The CIA’s assessment of China, November 1947

171 pages of sharp analysis that, if it had been read widely, would have pre-empted any discussion of “Who Lost China?”

According to the assessment of the day, extremists on both the Nationalist and Communist sides scuttled the 1946 political agreement brokered by General George C. Marshall. Civil war resumed in the Spring of 1946.

The Nationalist Government is bureaucratic, incompetent and corrupt. It has “a deteriorating supporting economy, lack of adequate communications and industry, corrupt and often professionally incompetent generalship, passive tactics, large and inefficient masses of men under arms, shortages in trained military personnel and technicians, depressed morale among officers and men, and a lack of popular support.”

The well-developed, little-damaged economy of Taiwan has disintegrated under Nationalist rule. “[T]he native population found it had merely exchanged Japanese domination for subjugation under mainland Chinese. Whereas Japanese exploitation of Taiwan had been orderly and efficient, Chinese administration has been characterized by lawlessness, economic decay, and industrial stagnation.”

The KMT still holds national power, but it is “gradually losing the sympathetic support of great masses of Chinese.” The faction-driven leadership prevents cohesion; the conservative CC Clique of Chen Li-fu and Chen Kuo-fu controls much of the party machinery while the more moderate Political Science Clique of Chang Chun recently took over government administration. [Note: Chen Li-fu and Chang Chun would remain highly active in KMT politics into the 1980s. This indicates how difficult it would have been for Chiang Kai-shek to purge the KMT.]

The CCP, on the other hand, is “the most effectively organized opposition party in China today,” largely because of its agrarian reform policies and support for freedom of individual expression. It’s soldiers are better clothed, equipped, trained and fed than KMT troops and officers advance on merit and are “comparatively honest, diligent, and competent.”

If the US were to withdraw financial support, the KMT government would “probably diminish to such a degree that it will no longer be able to provide effective government for China on the present national scale.” The CCP would step into the power vacuum and separatist tendencies on the periphery would grow. If the US continued to financially support the KMT government, it would be wasted without proper internal reforms that Chiang Kai-shek is incapable of providing.

“If a Communist state covering all or a large part of China were established, the Soviet Union would acquire for practical purposes another Soviet republic…The Chinese Red Army would become a wing of the Soviet military machine, with bases in China available for Soviet use”

“Present trends within China are in the direction of further instability and an extension of Communist military and political influence… [A]cute political and economic disorganization probably would prevail in China for several years. This disorganization would retard the development of a Communist China as an effective instrument of Soviet policy.”

To slow or reverse this would require nonmilitary aid of a minimum of $1-2 billion over a three-year (1948-50) period [i.e., about 0.6% of the US’ 1947 GDP, or $10-15 billion in today’s money). This would be in addition to military aid sufficient to train, supply and maintain 30 divisions.