I. Tugarinov to Cde. B.N. Ponomarev, ‘Concentering the Situation on Taiwan (Memorandum)’

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Copy Nº 4

[faded CPSU CC stamp:

32189]

to Cde. B. N. Ponomarev

I submit a memorandum about the situation on Taiwan prepared by the USSR MFA Committee of Information

ATTACHMENT: on seven sheets

DEPUTY CHAIRMAN OF THE COMMITTEE OF INFORMATION under the USSR MFA

[signature]

(I. TUGARINOV)

11 September 1956

N 1332/[sh]

distributed to:
Cde. A. I. Mikoyan

Cde. N. A. Mukhitdinov

Cde. I. V. Kapitonov

Cde. B. N. Ponomarev

[handwritten:

to the archives

informative material,

used in work about China

[[two illegible signatures]]

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Copy Nº 4

CONCERNING THE SITUATION ON TAIWAN

(memorandum)

The island of Taiwan is separated from the east coast of China by the Taiwan Strait, the smallest width of which is about 130 km. The area of Taiwan is 36,000 km², and according to data of the United Nations Economic Commission for Asia and Far East at the end of 1955 the population was more than 9,500,000 people. Deposits of gold, copper, oil, coal, and sulfur have been found on Taiwan. The total hydropower resources are estimated at 2.75 million kilowatts. There are many valuable species of wood in the forests, which cover about one-half of the island’s area, including camphor trees. Together with the islands of Penghu Liehtao (the Pescadores) Taiwan forms the province of Taiwan of the People’s Republic of China; the administrative center of the province is the city of Taipei.

As is well known, at the present time the island of Taiwan is used by the United States as a base to organize military provocations and the preparation of aggression against the PRC, and serves as a refuge for the remnants of CHIANG KAI-SHEK’s troops who were defeated by the People’s Liberation Army in 1949. All the measures of the US on Taiwan and the policy of the CHIANG KAI-SHEK government are subordinated to the goals of preparing a war against the PRC.

A large army (more than 600,000 men) and an enormous administrative apparatus requiring large non-productive expenses are maintained on the island. Neither in its population nor economic resources is Taiwan in a position to independently cover such expenses, despite some measures of the Kuomintang government to revive and develop industry and agriculture. Therefore the main source of the army’s and the administrative apparatus’ upkeep is American aid, comprising more than $2 billion since the time of CHIANG KAI-SHEK’s flight to Taiwan.

The economic situation of Taiwan. The economy of Taiwan fell into decay during the Second World War and the first postwar years. In recent years a definite growth of agricultural and industrial production has been noted on Taiwan. In 1955 the production of rice – the main agricultural crop – doubled compared to 1945 and reached 1,730,000 tons (in 1938 it was 1,400,000 tons). In 1955 more than two million tons of sweet potatoes were produced on the island, and about 14,000 tons of tea. There were 2,100,000 pigs and 400,000 head of cattle. However, by the present time the level of agricultural production on Taiwan has only reached the prewar level and in a number of cases has exceeded it insignificantly. The volume of production of the manufacturing industry has increased by three and a half times compared to that of 1948.

American aid has played a defining role in the revival of the economy of Taiwan. During the period from 1950 through 1954 the Kuomintang government received $369 million in the American aid program; in the 1955/1956 fiscal year the amount of American economic aid to Taiwan should comprise $73 million. Although a considerable part of the aid is given in the form of deliveries of excess American agricultural production, a definite part of it goes to the development of Taiwanese industry (the cement industry, the chemical industry, and the construction of power stations). Eighty-two percent of the capital investments made in the industry of Taiwan during 1953-1956 are from American aid and subsidies from an equivalent fund created from money which has come from the sale of American goods.

Taiwan is poorly developed economically.

The industry of the island is mainly connected with the processing of agricultural raw materials. The machinebuilding and heavy industry on Taiwan is essentially absent – it is represented by several small metallurgical plants operating from imported scrap metal, and also assembly plants and repair shops serving the army. Even the most rapidly developing sectors – chemical (mainly the production of fertilizers) and textile – cannot completely satisfy the needs of the local population, and Taiwan’s dependence on the importation of industrial goods remains as before.

The standard of living of the workers of Taiwan is very low. The workday on Taiwan lasts up to 12 hours, and the wages are extraordinarily low. In 1955 the average monthly wage of the workers of the main industrial sectors of the island was 365 Taiwanese dollars^[1], that is, it was more than a half lower than the official minimum living standard for the average family. The low wages, the growing taxes, and other kinds of requistions are leading to massive impoverishment and destitution of the island’s population.

With the aid of loans and taxes the government takes without compensation up to 2/3 of the harvest from the peasants, which chiefly goes to the upkeep of the military and administrative apparatus. The main part of the land on the island is owned by the state and the landowners. The landowners, who constitute nine percent of the population, have up to 60% of the land. Only about 1/3 of the peasants are owners of small plots of land; the rest are forced to rent it, paying up to 70% of the harvest for rent.

The predominance of American capital is one of the most characteristic features of the Taiwanese economy. In view of the insufficiency of local capital the Nationalists [chankayshisty] have been forced to stimulate foreign, mainly American, capital investment in every possibly way. At the present time American companies have been granted the right to transfer their capital and profit out of the country without hindrance. American monopolies have established control over the leading sectors of the economy of Taiwan; Westinghouse Electric International Company owns more than half of the local power stations; the production of aluminum is controlled by the American company Reynolds; in the sugar industry more than 30% of the main capital belongs to American companies; the production of cement and fertilizers is also under the control of American capital.

The penetration of American capital into the economy of Taiwan has a ruinous effect on the condition of local companies, many of which, not withstanding foreign competition, have ceased to exist. For example, the tonnage of the Taiwanese cargo fleet has diminished by a quarter since 1949 as a result of competition from American steamship companies.

The Taiwanese economy’s dependence on American capital and American aid, and the enormous non-productive expenses for the upkeep of the army, the police, and the administrative apparatus (constituting more than 80% of the total expenditures of the government) is leading to the financial situation of Taiwan being quite tense. The government budget has a constant deficit. Inflation is increasing on Taiwan in connection with the enormous expenses of the government and its limited financial abilities. In 1955 the issue of banknotes increased by 37% compared to 1954, but the output of industrial production and agriculture [increased] by only 2.5%. The increase of inflation is leading to a constant growth of prices and a fall of the value of the Taiwanese currency.

The Domestic Political Situation. An open military-police dictatorship has been established on Taiwan, rather of the dictatorship of CHIANG KAI-SHEK and a narrow group of his most trusted people.^[2] CHIANG KAI-SHEK’s immediate circle includes: CHIANG KAI-SHEK’s wife, who is his closest adviser and actively intervenes in government matters, although according to available information, her influence on her husband has recently weakened somewhat at the present time; the son of CHIANG KAI-SHEK, CHIANG CHING-KUO, who exercises supervision of the security service and the secret service in the army (the institute of political officers); Vice-President CHEN CHENG, a friend of CHIANG KAI-SHEK’s from student days, who deals with domestic questions and has been designated by CHIANG KAI-SHEK as his successor. CHIANG KAI-SHEK primarily maintains direct contact only with the above people, who are the main implementers of his decisions.

The Nationalists rely on the army and the 30,000-man police. Martial law has been introduced in Taiwan. The population of the island is subjected to mass repression. According to reports of the Taiwanese press more than 10,000 people were arrested on the island during the first months of 1955. By the end of 1955 there were more than 3,500 prisoners in the military prisons alone.

The Nationalists who arrived from the mainland occupy more highly-paid positions than the local residents, have their own clubs, and live in separate neighborhoods previously inhabited by the Japanese. The army mainly consists of soldiers and officers who came from the mainland. All this evokes a hostile attitude toward the Nationalists from the local population.

High taxes are imposed on the bourgeoisie of Taiwan and they forced to subscribe to loans, etc. In reality the local bourgeoisie are deprived of political rights in the conditions of a military dictatorship. Its role in local self-government is reduced to nothing in connection with the fact that the Nationalists have awarded themselves the right to veto any decisions of the local self-governing bodies.

The policy of theft and terror pursued by the Kuomintang government with respect to the local population is producing discontent from a broad strata of Taiwanese. However, in the conditions of a military and police dictatorship and the weakness of the working class at the present time no open demonstrations of the workers of Taiwan against the Kuomintang regime have been noted.

Part of the local bourgeoisie cooperates with the Kuomintang and favors the preservation of the existing regime with some increase of the rights of the local bourgeoisie. The interests of this part of the bourgeoisie are mainly expressed by the reactionary group of Banman, many members of which have joined the Kuomintang and maintain close ties with CHIANG KAI-SHEK. Another group of the local bourgeoisie, Ahai, cooperated with the Japanese in the past. It has great influence among members of the provincial assembly and urban municipal councils and supports the slogan of putting Taiwan under UN trusteeship, although its members do not openly oppose the CHIANG KAI-SHEK regime.

Outside Taiwan the “Provisional National Congress of Formosa”, which was organized by the so-called “Democratic Party of the Independence of  Formosa” in Japan in September 1955 creates certain difficulties and complications for the Kuomintang government. This Congress appointed a “provisional government” of the island. The “Democratic Party of Independent Formosa”, associated with the Japanese, advocates the neutralization of Taiwan and its transfer to UN trusteeship, and favors the disarmament and the dissolution of the Kuomintang government. The Party has branches in the US, Hong Kong, Singapore, Indonesia, and Japan. The PRC government regards the activity of this Party, which advocates the secession of Taiwan from the PRC, negatively.

The complete dependence on the US and the loss of any real hope of returning to the mainland are leading to demoralization in the ranks of the Kuomintang. A battle for senior posts is going on between separate groups of the Kuomintang. At the present time the group of CHIANG KAI-SHEK, CHEN CHENG, and CHIANG CHING-KUO is the leading group in the Kuomintang.

This group has managed to considerably weaken the “third force”, the part of the Kuomintang leadership which has tried to cast responsibility for the defeat in the civil war in China on CHIANG KAI-SHEK and to take his place to lead a more “effective” fight against the PRC. At the present time the “third force’, operating under the name “The Military Alliance of Free Chinese Democracy”, is making a demand to liquidate the one-party dictatorship of the Kuomintang and to create a broad anti-Communist front. However, this group does not represent any serious threat to CHIANG KAI-SHEK. The Americans are trying to use the “third force” in order to put pressure on CHIANG KAI-SHEK and in case of necessity they do not exclude the possibility of using it to replace the bankrupt regime of CHIANG KAI-SHEK.

The process of the demoralization of the Kuomintang elite and the growth of differences between the various groups in the Kuomintang also continues at the present time. In August 1955 SUN LIREN, the chief of the personal staff of CHIANG KAI-SHEK, who for a long time had different views than CHIANG KAI-SHEK on a whole series of questions, was “retired”. According to unofficial information  SUN LIREN was supported by the Americans (in particular, General [CHASE], the head of the American military mission on Taiwan) for the possible replacement of CHIANG KAI-SHEK with him. CHIANG KAI-SHEK arrested a large group of officers and bureaucrats among people he disliked, using the pretext of an investigation of the case of SUN LIREN.

Differences inside CHIANG KAI-SHEK’s own group are also increasing. In October 1955 the leadership of the Kuomintang criticized the government of O. K. YU, striving to blame him for the growing financial difficulties and the decline of the prestige of the Kuomintang government. One of the accusations made against O. K. YU was that he follows the Americans too blindly in everything. The conflict between CHEN CHENG and CHIANG CHING-KUO, which arose as a result of the struggle for decisive positions in the Kuomintang army, is becoming exacerbated.

At the present time the regime of CHIANG KAI-SHEK is being used by the Americans to conceal the fact of their occupation of the island of Taiwan, and also to create a tense situation in this area of Asia and to put pressure on the PRC.

CHIEF OF THE FIRST DIRECTORATE

OF THE COMMITTEE OF INFORMATION

under the USSR MFA

[signature]  (T. KUPRIKOV)

[illegible single-digit date] September 1956

[attachment] to N 1352/sh

^[1]One Taiwanese dollar = .04 US dollar

^[2] Besides the Kuomintang, a Social Democratic Party headed by XU FULIN exists on Taiwan and numbers about 2,000 members. The Party does not play a noticeable role in the political life of the island. In addition, there is a youth party numbering about 200 personnel workers. Both parties are supported and financed by CHIANG KAI-SHEK.