Friday, 15 February

I studied Italian on my own.

At three in the afternoon Duan Guanhai visited me with Shen Changhuan, He Jinhai and his wife, who is an overseas Chinese from Siam. I talked with Shen Changhuan alone for a long time and asked him to stay behind to have dinner. After dinner, we continued and he did not leave until half past eleven. According to him:

1. For veterans, they are not doing very well. Wu Tiecheng is only still in charge of the National Diplomatic Association. For Wang Chonghui, he is consulted only infrequently with regard to diplomatic issues. Zhu Jiahua also has no power.
2. Zhang Qun is still participating in the important matters related to the country.
3. Besides Chiang Kai-shek, Chen Cheng is the most powerful, and the latter is number two in charge. The reasons are as follows: a) Among military men he is still supported by the younger factions. (He Yingqin had been opposed by the people as he is partial to Liu Zhi, Gu Zhutong, Qian Dajun(錢大鈞)[1] and others. They are all useless. b) Chen Cheng is from a farming family, so he knows the difficulty of farmers. Therefore, he has carried out land reform which is winning the support of farmers. Also, he succeeded Wei Daoming and Chen Yi and he is quite kind to the natives of Taiwan. People in the local areas like him so much, calling him “Chen Cheng peh”[2].c) He is practical in his working style and he will handle matters in person. d) The majority of the younger factions were mainly raised by him.
4. Wu Guozhen wants to use pro-Americanism as an appeal to form an independent force to compete with Chen Cheng in succeeding the pedigree of Chiang Kai-shek. Sometimes Wu even wanted to leave the Kuomintang to stand on its own, so various sides are discontented with Wu Guozhen. According to the personal opinion of Shen, if Wu Guozhen is shrewd enough to take third place after Chen Cheng, Wu must [surely] be successful in becoming the third ruler.
5. Today the powerful younger factions are available [for service]. Among the sixteen persons of the Reconstruction Committee, Shen and Jiang Jingguo are also included. As for the power of Jiang Jingguo, it is not as powerful as rumored outside. The monthly budget of the Political Section of which Jiang Jingguo is in charge is only around $US7,000, which is far less than the section which Shen is in charge of. As for the most powerful meetings of Party affairs like those on diplomacy, finance and economics, he does not attend all of them. Regarding the situation of so-called intelligence officers, their scope is even narrower and the scale is absolutely not like before. Also, there is no special funding. As for Chiang Kai-shek’s treatment of his son, he is not as trustful towards the latter as rumored outside. On many issues, Jiang Jingguo does not dare to talk to his father, and in many cases, he has asked Shen to relay to Chiang Kai-shek. This is even more the case when Madame Chiang is present. Once, Jiang Jingguo got drunk and started crying in front of Shen, saying that he hoped his father would use a plane to parachute him down to Mainland China so that he could join the guerillas. From this we could imagine that he is not doing very well. But Jiang Jingguo is quite honest and treats his friends reasonably well, therefore Shen is on good terms with him. Shen had urged Jiang Jingguo to go to Europe for a visit. I also agreed, saying that when we were in Moscow I had urged him to do so.
6. At the time that the Reconstruction Committee was founded, it really had the intention to eliminate the power of Chen Lifu, Chen Guofu, H.H. Kung and Song Ziwen. Therefore, the reporters of the Associated Press were ready to publicise news from Taiwan which mentioned that the organization aimed to expel the power of H.H. Kung and Song Ziwen. But this news would destroy the political lives of Kung and Song, therefore Chiang asked Shen to correct the copy. But Shen was unwilling to do so and gave Chiang the reasons for and against. Shen said that if we made a correction for [their positions], then people on the outside would continue to think that Taiwan belongs only to H.H. Kung and Song Ziwen, which is bad [for the country] both internally and externally. This is naturally very true. But Madame Chiang was certainly unhappy when she saw the copy. Therefore, during the morning that the Reconstruction Committee was set up, Madame Chiang forced Chiang to meet with the American reporters. Shen and Madame Chiang were both present. At the beginning of the meeting, Chiang did not mention Kung and Song, but when reporters asked about them, Chiang did not at first answer.  After a while, Madame Chiang forced him to answer questions so Chiang had to do so. He told the reporters that he still trusted Mr. Kung. At the time, Shen had to do so accordingly. But after [Madame] Chiang left, Shen asked reporters to forward their article for Chiang to read first before it could be published. At the same time, Shen ordered the Telegram Bureau not to release any such news until it received the order of Shen himself. Shen then immediately went to see Huang Shaogu and the Minister of Propaganda, Chen [unclear, see original] asking them to pay a visit to Chiang in late evening and try their best to convince him to delete his remarks (with regard to H.H. Kung). Huang and Chen left and saw Chiang at half past eleven. They told Chiang the reasons for and against, saying that if the remark about Kung was released, then the whole Party would think that the so-called reorganization was merely an act of cheating. Party cohesion would be shattered. Chiang agreed. Therefore, the remark was deleted. As for the side of the American reporters, Shen tried his best to convince them to delete their copy and not to insist by the reason of loving China. The reporters agreed that such a remark would indeed be harmful to the Nationalist Government, therefore they did not insist on publishing it. Several days later, Madame Chiang read the conversations of Chiang with the reporters and she discovered that the remark about Kung had been deleted.  She was very angry. She asked Shen to see her. Chiang also knew that Madame Chiang would do something bad to him, therefore he asked Shen to see him first, asking him to push forward the idea that the decision to delete was the resolution of party headquarters. In addition, he reminded Shen not to debate with Madame Chiang. At the time Shen saw Madame Chiang, he was blamed by her as expected. But as Shen replied that it was the resolution of party headquarters, she could do nothing. She only blamed Shen for why he did not tell her. The words used and her facial expressions were both hardly acceptable. But Shen thought that as it had been successful, it was pointless to debate with her further. Moreover, Chiang had reminded him beforehand so he just tolerated and did not discuss any further with her. It was about one hour and Chiang found that Shen still had not left, he was afraid that Shen was unable to tolerate and debate with his wife. He immediately returned home and asked his wife to leave on a certain excuse. When Shen left, he pretended that he was wronged. Chiang also felt sorry for him. Several days later Chiang asked someone to send Shen $NTW2,000. This indicated that he knew Shen had been wronged but he could not tell Shen openly. Therefore, he took it as a gift for thanking him. The matter was thus ended. Shen told me the details of this matter because firstly he wanted to show that Chiang is willing to accept advice. Secondly, the younger factions dare to debate with Chiang. This is contrary to those of veterans, who worry too much and do not dare to speak the truth. Thirdly, the power of Kung, Song, and the two Chens has really dissipated.
7. Chen Guofu has gone away, while Chen Lifu has been in confrontation with Chiang. Chen Guofu had to leave because he was not doing well in Taiwan. The so-called elements of the two Chen brothers have openly, or secretly, parted with them.
8. With regard to various veterans, Chiang would summon them to have lunch with him once every two weeks and talk to them. As a matter of fact, this is merely a perfunctory gesture.
9. Militarily speaking, Taiwan has completely accepted the various suggestions of the American military delegation. Therefore, the said delegation has tried its best to advocate to the American government to increase its help to Taiwan. But at the same time, it was explained to Chiang that the production of the United States is limited. If the United States does not provide assistance to Korea and Vietnam immediately, they will be unable to keep going. This was also true to Western Europe. As for Taiwan, for the time being, it is still relatively stable. A slight delay will not harm the country.
10. In terms of finance, Taiwan has completely accepted the suggestions of the American consultants. Even the division of National Treasury and Provincial Treasury has been advocated by the American side. It was because in the past Wu Guozhen had sold off American exchange freely. As a result, more than half of the gold reserves in the National Treasury were used up in one or two years. Therefore, American consultants suggested that while certainly the United States could sell and buy foreign exchange freely, the situation of Taiwan is different, therefore Taiwan is not able to do so. So the Nationalist Government has accepted the suggestion that it appoints Xu Boyuan (徐柏園) as the Head of the Bureau of Foreign Exchange instead. At first, among the merchants there was opposition, particularly from returned students coming from the United States who are doing business in Taiwan. But Xu has told them that they have to make a choice between extending the limitation of foreign exchange, which the Nationalist Government is unable to implement, or to tighten control over foreign exchange. They all said that they prefer to do the latter. Therefore, in the past Wu Guozhen has declared repeatedly that there is a balance between income and expenditure. But he does not count the fact that he sold off the gold reserves, so how can he say there is a balance? Now the American side says it is meaningless for the Nationalist Government to make cheating remarks, and that it is better for the American government to replenish the shortfall directly. This was a much more practical method. Therefore, as the Nationalist Government has adopted this suggestion, American representatives are striving harder to request their government to help the Nationalists. At the same time the international environment is gradually becoming more beneficial to the Nationalist Government. Therefore, American assistance to China had increased. In order to cope with this policy, Chen Cheng has made further cuts in the expenditure for his part. The American side is quite satisfied.
11. The living standards of Taiwan are not as high rumored outside. Even to feed his own family of five, the expenditure on food per day is just $NTW20 ($US1 = $NTW30), and the food is already quite good.

After talking to him I felt that what he says is exactly the same as Liu Kai – that Taiwan is making quite good progress. I also told Shen what happened when I returned to China three years ago. I asked him also to relay my advice to Jiang Jingguo to pay a visit to Europe. He agreed.

[1] Qian Dajun(1893-1982) was a close associate of Chiang Kai-shek.

[2] “Pei” is in the pinyin of Minnan dialect.