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From Labor Action, Vol. 13 No. 35, 29 August 1949, p. 4.
Transcribed & marked up by Einde O’Callaghan for ETOL.
A turning point has been reached in the Chinese bureaucratic revolution. Recent events have forced the hands of the new rulers. They are now in the process of accelerating a change in policy which they had expected to accomplish gradually, or as Mao Tse-tung never failed to emphasize, “by stages.”
Several events beyond the control of the Communist Party have altered the situation. First, the Kuomintang blockade has been extremely effective. It has rendered helpless the great cities of the Yangtze Valley and has made Shanghai a burden instead of an asset.
Second, the great river floods have produced a food shortage, not only in Central China and its cities – but in North China as well. This in turn has affected social relations in the villages and undermined Communist strength, particularly in Central and East coastal provinces.
Third, U.S. policy has perceptibly hardened. The KMT blockade is being respected in spite of formal protests and it is probable that Washington has pressured London into acceptance of the situation: consequently foreign trade has dried up.
The combination of these developments has limited the initiative which the CP has held. To date it has been able to determine pace and circumstance to a very large degree because all of its policies, social and political, were organized around the single axis of the military conquest of power.
This phase is now over in two-thirds of coastal China and Manchuria. What is more, victory in the South has become a necessity imposed by the blockade and the floods. The time schedule has been upset. Administrative training schools have curtailed courses and students have been ordered into the “take-over” corps without completing indoctrination studies.
The terrible flood of the central Yangtze this year is the worst since 1931, affecting six provinces and making homeless over 20 million people. Famine, with its inevitable consequences of pestilence arid death, is a real threat. Nature has apparently done her worst, for while there is flood in the central provinces, there is draught in the North.
The Stalinist government has increased taxes and revenue in kind in order to feed its newly conquered cities; In fact, it has attempted to woo the workers, from whom the party has been alienated these last 20 years, by’tying wages to the rice-price index. This has been done in Shanghai and Nanking, as part of the “labor honeymoon,” a prelude to integrating the workers into the CP-confrolled apparatus. In Manchuria, where the CP is securely in the saddle, such “leniency” toward labor is “ long past.
In the face of the disaster to agricultural production in the stricken areas, the CP has undertaken not only to feed the cities, then, but also to provide fixed food income of the workers. The resulting squeeze on the peasantry has brought about the first rumblings of revolt in the countryside. The Red Spears secret society has again become active and other groups seem to be able to rally small peasant oppositions. They do not represent threats to CP power by any means but they are straws in the wind whose significance has been grasped by the new ruling class. For while engaging in suppression of every show of discontent, a change in policy has been ordered.
When the army launched its drive for the Yangtze Valley in March the public manifestoes promised that “the feudal land-ownership system in the rural areas is to be abolished.” However, “it must be eliminated only after adequate preparation and stage by stage.” In other words, no agrarian revolution which would transform social relations through the activity of the peasants themselves. The stages were to be regulated by the rate of CP consolidation. “The land problem can only be solved after the People’s Liberation Army has arrived and work has been carried on for a considerable period for its solution.” The nature of the change must not too sharply upset the agricultural system so that all social classes emerging from agrarian reform should owe their status to the CP. “Generally speaking, reduction of rents should be carried out first, and land distribution later.”
Thus the hinterland of the newly taken cities is still under the traditional semi-feudal structure except that its rich peasants have waxed ever richer as a result of food shortages. Reform by “stages” has now developed into a danger because the swollen-rich peasants are strong and can now resist any change more effectively. They can also demand their own prices. The secret societies are not so much peasant organizations as rich peasant organizations.
Therefore, Lin Piao, Central Committee member, has ordered acceleration of land reform. On July 21, he. declared: “In Central China, where industry is weak, the cities at present rely greatly on the villages for their supply of food and raw materials – while feudal influence and KMT secret agents are still very strong in the villages. It is very important that the feudal system in rural areas be overthrown ... The central emphasis must first of all be on work in the countryside.” (Emphasis in original – J.B.) For a time the emphasis must shift from the great Yangtze cities.
However, even where the agrarian reform has been carried out its results have not always been exactly as planned. The basic law of agrarian reform which the CP has promulgated not only retains class divisions in the village but allies the party with the “new rich peasant” – the village Stakhanovitch-kulak. This class, freed from feudal overlordship with its economically depressing burdens, increases production and accumulates wealth so that the tendency toward a “scissors crisis” has already become a major problem in North China, where CP rule is less than a year old: From Tientsin, on March 24 the official New China News Service reports: “One of the problems still to be worked out is the restoration of a balanced relation between the economics of the city and the surrounding countryside. The purchasing power of the peasants has increased greatly after the land reform and they are able to buy more goods than the old village industries can supply.”
Antagonism between the needs of city and country is part of the backwardness of China but has been accentuated precisely by the nature of the CP agrarian program, of abetting the “new rich peasant” class. In Central China, where even this reform has been awaiting the readiness of the bureaucrats, those problems are even more distorted and extreme because they still have a feudal form. On top of this, natural disasters of flood and drought have enhanced the position of the rich peasant to a commanding position, while it has brought disaster elsewhere.
It is likely then that the party will attempt to change its relations to the peasantry:
The real problem that presses even more irresistibly against the new social structure is industrialization. The regime has built up an enormous pressure in the countryside by its “stage” policy and its encouragement of the “new rich” peasants. It has taken them into the CP, given them all manner of prestige and honors, organized congresses of these “labor heroes” and in fact has organized agriculture around them – the rich peasant Wu Men-yu has been made a national symbol like Stakhanovitch and Boussygin were in the first Five Year Plan.
Industrialization cannot be put off or developed slowly with American and British imports, as might have been expected until recently. A new sharp turn is necessary, the first outlines of which are already emerging. It is the peasant and the worker who will be made to pay for a new forced pace. Even lifting the blockade will not change this now.
The march on Canton has become a necessity. For Shanghai and Nanking are useless if the villages that feed them are not tied to them economically. Introduction of the new agrarian reform tempo is intended to integrate the terror. Also the province of Hunan in the Middle Yangtze and Szechuan in the West are the granaries of the great valley. They both produce rich rice surpluses. The present double-pronged drive on Hunan, capital of Szechuan, is intended to relieve food shortages of the coastal cities and secure its continuous flow henceforth. Capture of Szechuan would also eliminate a possible retreat to a “western redoubt” such as Chiang Kai-shek organized during the Japanese war, when he made Chungking his capital.
More important, the conquest of Canton has been made immediately necessary by the blockade. Canton is necessary for the discrediting of the legal status of the KMT government. Once the southeast coastal cities have fallen to Stalinist armies, the CP can claim to be the effective spokesman for the nation. The British and possibly the U.S. as well would grant de facto status; that is already indicated. The way would be opened for Russian satellite de jure recognition.
Most important, the CP would not only deprive the KMT of the physical means of conducting a blockade but by challenging its legal status strengthen its trade position. Finally, it will then be in a position to convene its political consultative conference, out of which will emerge the new CP-controlled national government, and this will be the instrument for obtaining international status. The blockade has hastened the entire development, posing problems sooner than the party was ready to face them.
The chief result of the port-closure proclamation of the Canton regime has been to place a premium of danger on foreign ships attempting to enter CP-held ports. Both the U.S. and Britain protested the order as illegal.
Nevertheless there was a difference in the tone and content of the protests. Washington found many loopholes in the KMT order. But London declared it would use naval vessels accompanying its merchant ships to smash the blockade and placed full responsibilities for consequences with the KMT. For some time the British have seen their opportunity coming with the victory of the CP, which so loudly proclaimed the U.S. as the primary imperialist target. There have been persistent rumors of secret negotiations. The violence of the British note to the KMT would tend to confirm the difference between American and British interests in China. The first ships to break the blockade were all British.
Nevertheless the CP leadership would be guilty of the narrowest stupidity, to fail to see the handwriting on the wall. Arid whatever else it is, it is not stupid. For even if the British do convoy their ships into CP-held ports this will only be a trickle. And the cost of blockade running is notoriously high. The price of goods so obtained will be such a drain as to limit the trade to the most essential and valuable items. No less a person than Chu Teh, one of the top party triumvirate, has declared that preparations must be made to withstand a blockade of eight to ten years’ duration.
While the blockade brought the matter to a head rapidly it did not create the basic situation of China’s difficult and adverse position in international trade. The fact is that China has very little with which to pay for the imports she is able to get. Even before the Sino-Japanese War, in 1936-37, Chinese trade operated at a severe deficit which was overcome entirely by the enormous home remittances of overseas Chinese. This latter source of foreign credits, which do not need repayment in exports, has fallen off sharply and will not again become an important factor in the trade balance. Overseas Chinese will not be able, and very likely will not be willing, to make such large-scale remittances in the future. In the post-war years Chinese trade has operated at a deficit of about $850 million (if UNNRA is included) out of a total of a little over $1.1 billion.
The sole basis for an extensive China trade would have to be political subsidies such as the $2½ Washington granted to prop up Chiang Kai-shek during the past war years. No basis exists for such international subsidies. This analysis applies if the old pattern of trade, is maintained by which one-third of China’s exports went io the U.S. and even more of her imparts came from the U.S. A revamped trade pattern has been projected by the new regime which would reorient China’s exports to Russia, Japan and Southeast Asia on a diversified basis. Trade with the West, however, has no economic basis for CP China and still less political reality.
What has China to export? Most of what China exported in 1936, for example, is no longer suitable or has been replaced by other sources or products. After all, China was cut away from trade with the West since 1937, by the Japanese occupation of the seaboard cities. She can still sell tin, wolfram, tungsten and antimony, but these strategic metals are in small quantity and are not so much elements of trade today as strategic elements. In all probability Russia would have first call on them. Even tung oil, a primary export to the U.S. is too small an item and has been replaced. China has raw materials for export in some quantities but not to the U.S. If such comparative giants as Britain suffer from a dollar shortage, the prospects of economic trade of China with the West are extremely limited.
The tendency of Stalinist economic policy is toward withdrawal from the world market. At a time when the Chinese party has embarked on intensified industrialization it has made autarchy its watchword: not a complete withdrawal but sharp limitation on imports. The difference between the world market costs and the higher production costs will be borne by the masses of workers and peasants. What the CP leadership has in mind is not identical with Stalin’s program of “building socialism in one country.” For as Mao Tze-tung stated in his major declaration of July 1: “Internationally we belong to the anti-imperialist front, headed by the Soviet Union, and for genuine friendly aid we must look to this front and not to the imperialist front.” China’s industrialization will occur at a political price.
This is the reality behind the new relationship to the U.S. So that none miss the point, Mao said:
“We are told that we must do business. Certainly business must be carried on. We are only against our own and foreign reactionaries who hamper us from doing business ... We are told that we need the aid of the British and American governments. Today this is childish reasoning. Imperialists still rule today in Britain and the U.S. Will they give assistance to a people’s state?”
What Mao is saying is that it is not primarily a matter of “business” but of “assistance” or subsidies. “The CP and also the progressive parties and groups in these countries are now campaigning for the establishment of trade and even diplomatic relations with us. These are good intentions.” But they do not answer the main need since the amount of potential trade is so limited.
In the light of the above, several recent incidents become comprehensible, such as the jailing of William Olive, U.S. consular attache, and a number of other attacks on American representatives. Something new has been added to political harassments with what is fast becoming a campaign against U.S. and British business in China. That the initial attitude of correctness and protection of all such foreign properties has changed is indicated by the Gould newspaper affair, for example. On July 5 all remittances from abroad were halted, directly affecting all foreign business. The Chase National Bank has been ordered closed. Foreign-trade regulations, at first hailed as even more favorable than those of the KMT, have been amended as the authorities have taken ever increasing direction.
“During the past two months the authorities have followed a liberal policy in deference to the general demand of the people,” says the Shanghai CP daily. “These provisional liberal policies included measures for encouraging foreign trade and seagoing transport and also lenient policies toward KMT underground workers. However, our liberal and lenient policies were ignored by the imperialists ...”
On July 27 the Shanghai Liberation Daily ran a front-page editorial “instructing all party workers in East China to devote their attention to freeing all economic enterprises of the previous dependence on the outside world.” (N.Y. Times, July 28.)
Shanghai, the great port metropolis that carries from one-half to two-thirds of China’s trade, is the chief obstacle. Without trade there is no Shanghai. Located at the mouth of the Yangtze it draw’s from and in turn supplies the economic heart of China, the Yangtze basin with 100 million people. Its huge foreign colonies effectively controlled the city’s economic life, organizing it for the needs of foreign profit. The population of the city is now swollen to almost twice its 1940 size, while the blockade has brought both commerce and industry to a standstill.
Two-thirds of China’s textile mills are in the city. Given the present shortage of domestic cotton, these mills are dependent on imports, chiefly from the U.S. Today 62 per cent of these plants are idle. The CP now proposes to move large numbers of these factories into the interior, closer to domestic cotton sources. Those that have their own power generators are to be moved first. The huge American-owned Shanghai Power Company used to operate a diesel oil plant with oil that was 100 per cent imported. If has now been transformed to coalburning, the coal coming from North China.
To reduce the enormous food supply needed to feed this swollen city of almost seven million it is proposed to redistribute from two to three million people. Cigarette factories, 80 per cent of which are in Shanghai, are to be moved to Shantung in the North; match factories to Hankow in the interior. In their place new plants are to be erected for supplying agricultural implements to the huge agricultural population.
“Because of the current difficulties ... we are being led to recognize the absolute need for us to rid the old Shanghai in good time of its reliance on imperialism,” says an editorial in the Shanghai Daily News of July 14.
Such vast economic alterations will bring tightened state control. Although the “alliance” with the “national bourgeoisie” is not yet over, its arena will be increasingly limited under the restricted economy that is being built and the entire arena of the “new democracy” will be narrowed.
The first cost of these problems is to be transferred to the working class. On July 23 the entire Shanghai press suddenly discovered that workers in many cigarette factories had asked for wage cuts to assist in the emergency. The groundwork is being laid for an attack on the workers’ standard of living as the “honeymoon” draws to an end under present exigencies. Such cuts may become a form of pressure on workers to leave Shanghai; hunger is an instrument of Stalinist economic policy.
On the part of the State Department, a harder attitude is emerging. To begin with, policy is no longer based on expectations of an early Chinese Titoism. The recent White Paper not only “wrote off” China but in effect acknowledged extension of the Iron Curtain to China’s bordering nations. Washington’s China policy will tend increasingly to coincide to. its general policy toward Russia and its satellites. De facto recognition, a probability, will not alter this. No economic aid is likely while an economic squeeze is probable.
Certain conclusions can be drawn indicating the changed relationship.
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