Behind the Reform Facade
Cooperation's Price Tag
THE NATIONALISTS AT TAIPEI need no reminder that one of the best-loved American saints is Santa Claus; but the Formosans think he may be something of a fraud.
The military policy change in June, 1950, brought with it a major adjustment of economic support programs. In a sense the Americans took over where the Japanese had left off, but there was an immense amount of work to be done to recover the losses which had been sustained in the tragic five-year interval. It should not be forgotten that fifty years of Japanese investment - an investment of administrative skills as well as money - had prepared the foundations for the Sino-American achievement. This is sometimes overlooked in the propaganda designed to put "Free China" before the world as a shining example of successful "international" cooperation.
From 1950 onward there was an outpouring of printed matter describing and praising projects undertaken with American initiative and paid for with American funds. Books, brochures, pamphlets and mimeographed throw-aways were usually paid for with program funds and were designed to keep the Congressional appropriations pump well primed.
The Rankin memoirs offer a summary of aid programs which
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came under the Embassy's general supervision. The so-called Conlon Report prepared for the Senate Foreign Relations Committee in 1959 provides a more detailed analysis.
When Mr. Rankin reached Formosa in August, 1950, there were fewer than three hundred Americans on the island and the available program funds were a mere $20,000,000. In 1952 a total Of $300,000,000 became available and by then Parkinson's Law had begun to work. When Mr. Rankin prepared to leave Formosa in 1957 there were about 10,000 Americans present in an official capacity. There were other hundreds engaged in private enterprise. Commodore Perry's old dream of a Sino-American administration of the Formosan economy, outlined in 1853, seemed about to be realized.
The Ambassador estimates that the total American investment in military and economic aid for the period 1950-1957 had reached two billion American dollars. The Conlon Report notes that in terms of per capita investment Formosa received much greater aid than any other country served by an American program anywhere in the world. For the Nationalists these were indeed the Seven Fat Years.
With such an enormous investment in such a small area it is not surprising that the total agrarian and industrial output rose rapidly. Statistics presented to visiting Congressmen were usually set forth to show percentage increases after 1949. Few opportunities were seized to note that production levels in the period 1945-1949 had dropped far below prewar Japanese production levels and in some instances had sunk to the production levels of 1895. Nor were VIP's often reminded that as total production moved back to prewar levels and then gradually surpassed them, the total population on Formosa had nearly doubled since the surrender. By 1959 it was moving beyond ten million with a growth rate Of 3-5 per cent annually. Not much was said of the fact that mainland refugees, members of the armed forces, the government and the Party were nonproducers. All had to be supported by the Formosan farmer.
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There was never much left at home when the tax-collector had taken his share.
Formosan friends who wrote to me at this time expressed deep appreciation of American effort to improve economic conditions but pointed out that the net result was to strengthen the hold which the refugees had upon the economy. The greater part of Formosa's industrial establishment had passed into mainland Chinese hands thanks to the postwar confiscation policies. Every American dollar used to subsidize the major industries became a contribution to the unnamed Chinese investors, shadowy figures in the background. The Formosans believed that chief among them was T. V. Soong and other members and associates of the "royal family."
There was undoubtedly a continuity of management of the national and local finance dating back to 1927. During the exodus Of 1949-1950 Kung and Soong had left China for the United States and official retirement, but the men who assumed direction of economic affairs on Formosa had been their close associates for many years. O.K. Yui, a graduate of St. John's University at Shanghai, had been variously Managing Director of the Central Trust, Vice Minister and Minister of Finance in the National Government, Managing Director of the Bank of China and deeply involved with other large banking interests, all dominated by Kung and Soong. On Formosa Yui succeeded Yen Chia-kan at the Bank of Taiwan, then became Governor and at last Premier or President of the Executive Yuan. Yen, too, had become Minister of Finance, then Governor, and (succeeding Yui) Premier of the National Government. It was a game of musical chairs in which the Formosans were not invited to take part.
These were the men who continued to handle American aid to Formosa after 1950 as they had handled it in wartime China, working now very closely with the large American Aid mission.
Formosans agree that under Governor Wu there was a great improvement in the administration of law and of economic
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affairs. Foreign observers agree that graft, corruption and the grosser forms of nepotism were significantly reduced. It was standard practice, however, for mainland Chinese to imply to foreign visitors that Formosans were a rather backward or provincial lot, and that Formosa's technological development was for the most part a Chinese achievement since 1945. Under the circumstances members of the aid missions readily adopted the official line; aid propaganda brochures asserted that the United States was providing "Fuel for the Good Dragon" and mission members talked of their work in terms of the big push back to the mainland. Aid to the native Formosans was a side issue and they knew it.
On the mainland an abusive traditional Chinese landlord system had long been recognized as a prime source of peasant discontent. The Nationalists had talked of reform but for years had done nothing on a significant scale. The Communists exploited these unfulfilled promises to woo support among the landless peasants. Very late - after World War II - American advisors in China had persuaded the Nationalist Government to organize a Sino-American Joint Commission on Rural Reconstruction. It made little headway on the mainland, for its reform program disturbed too many great landholders who were influential members of the Nationalist Party, Army and Government. They would not tolerate change. The JCRR, as it was called, was transferred to Formosa during the great retreat.
In Formosa it could surge ahead with its land redistribution plans. The Formosan landholders were fair game; no one in the Government or Party hierarchy was hurt by land reform except perhaps those who had acquired extensive property under the Chen Yi and Wei administrations.
American aid-program literature gives exceptional prominence to two measures sponsored by the JCRR. The Land Rental Reduction Program which was written into law on May 25, 1951, said that henceforth the tenant-farmer shall not pay more than 37.5 per cent of his crop or crop-value as rental on
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his leasehold. The American literature calls this a magnificent achievement and a generous reform, but it usually implies that the Formosan tenant-farmer had suffered exorbitant rent-rates before the Chinese came in to liberalize the system. In point of fact the Japanese had established rent controls and land-courts before the war. The exorbitant rents being so handsomely reduced in 1951 had been exacted from the Formosan peasant after the Chinese took control in 1945.
The second great achievement, according to aid-program literature, was the so-called Land-to-the-Tiller program set in motion in 1953. Every farmer who held more than three hectares of middle-grade paddy field (about 7.5 acres) or six hectares of dry field was compelled to sell his surplus land to the Government. He was paid 70 per cent of the price in "land bonds" and 30 per cent in stock in govemment-owned industries - principally industries which had been confiscated in 1945.
Thousands of Formosans were grateful for the opportunity to become landowners or to add a little to their small holdings, even though they found it difficult to obtain chemical fertilizers and had very little rice left when the tax-collector was finished with them. But for thousands of Formosans the Land-to-the-Tiller program brought a sharp reduction in their modest standards of living. Many suspect that the program was designed as much to destroy the base of the emergent middle class (the class which produced the leaders of 1947) as it was to aid the landless peasant.
Few Formosans - very few - had great landholdings before 1945, but there were many who had enough income to support them in comfort at home, to invest in small shops or businesses in the towns, and to send bright sons and daughters on to higher schools and to the universities in Japan. Now they were forced to accept bonds and stocks which taken together could not produce income equal to the income lost when private land was taken up by the Government. Furthermore, they
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were well aware that govemment-owned industries were generating salaries and dividends for the privileged managerial staff who were predominantly Chinese. From one of my former students came a letter touching on the subject and dated August 28, 1953.
... Taiwan has changed very much since . 90% of Taiwanese become poor and poor. I've lost all my fields during these years ... the Government took up and sold them to "tillers." We can't pay daily expenses with salary, which is less than $50 a month. Thus we can't educate our children.
There are two ways; one is to go abroad and don't go back to Formosa, the other is to get a job in American office, as Mr. ___ did. As for me, I don't want [to stay] in Formosa where there is no freedom, no hope. 
I am inclined to accept this at face value, for in a letter to Assistant Secretary of State Dean, Rusk Ambassador Rankin reported that "due to rapid population growth and to the much more rigorous collection of taxes from the largely agricultural population" some American experts in the Aid Mission were convinced that "the average inhabitant of this island is worse off economically than he was a year or two ago . . . "
Dumping the Liberals
While the tax-collector's rice sacks were being filled so bountifully what was happening elsewhere in General MacArthur's contented democracy, where representative government prevailed, the courts were in good order and the standard of living so high?
The appointment of Dr. K. C. Wu to the governorship in the last days of 1949 had been a desperate but successful effort to restore American confidence and to ensure a continuing flow of American aid. Dr. Wu had moved promptly, boldly and with
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vigor to institute political as well as economic reforms. At the top of the list was his program to grant some measure of political expression to the Formosan people. He must gain the confidence of the native islanders. The Nationalist refugees would need Formosan help if the Chinese Communists one day moved against the island in force.
Wu's liberal views were well known. He was never a great favorite with the Generalissimo, and between the Governor and the Heir Apparent there was a wall of mutual dislike and mistrust. Now Wu, with great courage, dared to tell the Generalissimo of his son's extreme unpopularity. Ching-kuo had instituted a reign of fear throughout the island, using the secret services, the police and the political commissars in a ruthless attempt to secure absolute submission to Party, Army and Government. The Governor warned the Generalissimo that the Formosan majority were being estranged to a dangerous degree.*
General Chiang Ching-kuo on his part believed Wu was making dangerous concessions and that liberal gestures were no longer needed. Now that the Republicans had come to power in Washington (in January, 1953) American aid was assured; Wu had served his purpose. But more than that Ching-kuo had lost face before his father the Generalissimo. No liberal civilian could embarrass General Chiang Ching-kuo with impunity. Wu must go.
On April 3, 1953, the Governor narrowly escaped assassination. On April 10 he was dismissed but was given permission to leave Formosa. There was a second attempt on his life. It is said that when Madame Chiang learned of a plot to waylay Wu en route to the airport she intervened with the Generalissimo, pointing out what serious repercussions this would have in America.
Dr. and Mrs. Wu were required to leave their young son a
* Texts of Wu's later communications to the Generalissimo and to the National Assembly on this subject are to be found in Appendix II, pp. 480-486.
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hostage at Taipei. The former Governor retired to Evanston, Illinois, and there kept silent for thirteen months. At last influential Americans persuade the Generalissimo to permit the boy to apply for a passport and to leave Formosa.
When the lad was safely away Wu spoke out. In a series of "open letters" to the National Assembly at Taipei he sought to alert the Assembly to the need for genuine reform if "Free China" were to survive. He noted Chiang Ching-kuo's dangerous ambition to succeed his father despite constitutional provision for succession to the Presidency of China. His letters reviewed Ching-kuo's "political commissar" system which was undermining the morale of the Army, a system which he and his father had borrowed from Red Russia. He reviewed Ching-kuo's abuse of police authority and his campaign to generate fear everywhere as a means to secure absolute obedience. He noted that neither the Formosans nor the mainland Chinese refugees had guarantee of individual rights, freedom of assembly and publication or the right of free speech. It was a powerful indictment.
The former Governor asked the National Assembly to publish his six-point analysis of the Taipei dictatorship. Chiang quite naturally suppressed it and accused Wu--rather belatedly of "dereliction of duty," "corruption in office" and "treason."
From Evanston Wu replied that he would be glad to stand trial in an American or an international court but never in a court set up by Chiang. He then addressed a new series of questions to the National Assembly and the Generalissimo, each designed to illumine an aspect of the Gestapo organization which ensures proper public attitudes in "Free China."
In an attempt to rouse Americans to some recognition of conditions on Formosa the former Governor published a vigorous account of his experiences with Ching-kuo and in passing called Peng Meng-chi Chiang's "hatchet-man." The article entitled "Your Money is Building a Police State in Taiwan" appeared in Look Magazine on June 29, 1954. But this was the McCarthy
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Era and the period of growing crisis concerning the offshore islands where--if Mr. Dulles were to be believed--Chiang Kai-shek was nobly defending American democracy. Wu's voice was drowned in the clamor for more aid for Chiang.
K. C. Wu's fate served warning that Chiang Ching-kuo would brook no opposition in high places. With the liberal Governor disposed of Chiang's security officers turned their attention to a liberal General who had been given prominence in the "reform" period, General Sun Li-jen, Commander-in-Chief of the Chinese Army.
American correspondents had heard Formosans say that Wu and Sun were two mainland Chinese leaders they felt they could trust to give Formosans a "fair deal." This praise had been dutifully reported in the American press. From there it went back to Taipei by way of the clipping services.
Sun freely expressed his belief that Formosan youths made good recruits and took pains to ensure fair treatment for them in the ranks. He, too, realized that one day the refugee Nationalists might need Formosan loyalty. He was also known to believe that Taipei should look first to the defenses of Formosa and should perfect them before venturing overseas to "retake" the continent. It was well known that among foreigners General Sun was the most popular Nationalist officer, that members of the American military mission considered him the finest professional in the Chinese Army and that he enjoyed Washington's full confidence.
Added up, these presented to Chiang Ching-kuo's eyes a most formidable challenge. Ching-kuo is not a regular Army man, a product of the Chinese military academies, but an interloper in the military establishment, raised to favor by his father. Even in 1955 he was holding key positions, however, and could ruin any officer and any member of the Government. He was master of the secret services, controlled the Youth Corps and the Veterans' League and was Director of the Political Department in the Army with commissars or spies in every
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subdivision of the military organization. From Ching-kuo's point of view if General Sun enjoyed American support and had the loyalty of the Formosan conscripts he was a dangerous man.
Sun made the mistake Wu had made. He found occasion to protest --politely, of course--that Ching-kuo's political commissars seriously interfered with regular Army operations, morale and discipline.
In midyear 1955 the Generalissimo had occasion to stage an elaborate military review in honor of General Maxwell D. Taylor, USA. The American Ambassador was present. Several reckless and dissatisfied young officers seized this opportunity suddenly to push forward with a petition in which they set out grievances. Chiang was furious. On the spot General Sun was relieved of his command, held responsible, and placed under restraint. Then followed an inquiry conducted chiefly by Chiang Ching-kuo's agents. General Sun soon found himself charged with "harboring Communists" in his vast military organization.
He was placed on trial knowing full well that whatever the "evidence" was it could be twisted readily enough and could lead to the firing squad. The court-martial, however, found him not guilty of Communist association or conspiracy but of "culpable negligence." None of Sun's American colleagues would have accepted a "red conspiracy" charge at face value hence he could not be done away with out-of-hand. It was certainly not wise to let him leave Formosa as Wu had done. He was sent off, under Chiang Ching-kuo's surveillance, to retirement at a small house far from the capital, where Ambassador Rankin observed him "tending roses."
A bit of truth was visible through the curtain of words surrounding the trial for the indictment had included not only charges of "culpable negligence" and "harboring Communists" but also an allegation that Sun had "built up a personal clique" for his own advancement.
To discourage any demonstrations of sympathy some three hundred of Sun's officers were arrested in the case - quite
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enough to chill any desire in the Army to speak out or act thereafter in Sun's favor. The Generalissimo chose Ching-kuo's trusted associate General Peng Meng-chi to take Sun's place as Commander-in-Chief.
A Case for Mr. Dulles
After attending a meeting of the Committee on Foreign Relations one day Senator William Fulbright rose in the Senate Chamber to declare with some heat that "What we want and what we will support is the truth. What we want and what we will support is a Secretary of State who will not treat us as children ready to clap in delight at every fairy story, however fanciful."
He was speaking of Mr. Dulles and his views were shared in many capitals around the world. From the public record it is indeed difficult to know which story-of-the-moment to accept when we search for his basic policies toward Formosa.
No American leader was more outspoken in his condemnation of Peking and all its works and none could surpass Mr. Dulles in lauding the high moral purpose, dedicated leadership, and world importance of Chiang Kai-shek and his associates at Taipei. His record for "brinkmansbip" needs no comment here; who could doubt then that Mr. Dulles considered the Nationalists to be America's most important allies? The Secretary was not one to walk softly.
As we sift through the record, however, we see that Mr. Dulles in truth thoroughly undermined Chiang's legal position on Formosa and skillfully blocked his plans for a large-scale continental venture. While talking non- recognition of Communist China it was he who flew to Europe to confer with China's Foreign Minister Chou En-lai. It was Mr. Dulles who arranged the ambassadorial meetings in Europe through which Peking and Washington continue to keep in touch and at which the Formosa problem can be discussed.
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The conferences between ambassadors from Washington and Peking take place behind closed doors far from Taipei. The Nationalists resent them, wondering if their claims upon China proper and Formosa are being discussed or compromised in any way. Formosan independence leaders in exile likewise mistrust these meetings and wonder if Washington seeks a formula through which (after Chiang's death) the island may be "negotiated" into a state of neutrality and from a state of neutrality in due course be transferred to Peking, thus restoring "the territorial integrity of China."
It will be recalled that the State Department held unwaveringly to the view that China's territorial integrity must be respected and that Formosa must be restored promptly by treaty signatures. This was the official position on April 8, 1950, when Mr. Truman invited Mr. Dulles to become Foreign Policy Advisor to the Secretary of State. Then came the June crisis - the Korean affair - and the President's statement that "the determination of the future status of Formosa must wait the restoration of security in the Pacific, a peace settlement with Japan, or consideration by the United Nations." On September 8 Mr. Dulles was directed to negotiate the Peace Treaty. He had therefore to steer a diplomatic course through very choppy waters. It was an extraordinary performance, for henceforth his fervent public statements and his "brinkmanship" seemed entirely to support Chiang's territorial claims, but his official acts and hidden negotiations had quite a different purpose.
He soon found a formula which enabled him to circumvent or cancel out that unfortunate "territorial integrity" commitment. He first proposed that Japan should merely relinquish sovereignty there, after which the island's permanent status would be determined by the United States, the United Kingdom, Soviet Russia and China acting together on behalf of nations signing the Treaty. If these four Powers could not agree within one year the question should then be taken into the UN Assembly.
The Generalissimo would never accede to this and
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Communist China was not a member of the UN nor among the nations summoned to San Francisco. In midyear 1951 Mr. Dulles let it be known that the Nationalists, too, were not invited and would not sign the Treaty. Thus at San Franciso, Japan was divested of her sovereign rights in Formosa. Title was surrendered to the forty-eight nations who signed the Treaty, to be held in trust by them until the final issue can be settled in the UN Assembly at some future time. The Treaty came into effect in 1952 and there the matter stands.
Taipei announced that it would not consider itself bound by any provisions affecting its interests. As for feeling bound by President Truman's earlier embargo on provocative crosschannel military action Chiang had long since displayed indifference. Ambassador Rankin notes that there were frequent hit-and-run forays to the China coast; Americans at Taipei conveniently looked the other way.
Upon entering office in 1953 President Eisenhower promptly fulfilled Republican campaign promises to lift the ban. It was well known, however, that he too wanted to minimize the dangers of a full-scale war along the China coast. Perhaps he thought Chiang's military advisors could control the situation by controlling military supply.
Chiang (and not a few of his American friends) had other ideas. He was determined to provoke an open conflict between the United States and Communist China. No other conclusion can be drawn from the pattern of subsequent events. Throughout 1953 the number of cross-channel raids increased in number. The Nationalist Air Force extended the range of attack to reach inland cities and industrial targets. Significantly there were no visible efforts to "go it alone."
Soon the world's attention was fastened on Quemoy and the Matsu base - the offshore islands. As Chiang built up his installations on Quemoy with an immense amount of publicity the Chinese Communists developed highways and railways leading into the coastal area and began a build-up there to
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block any Nationalist attempt to cross the Quemoy water barrier in force.
But still Washington would not agree to support offensive action on a large scale. The Nationalist propaganda campaign within the United States was being pushed to an extreme and was generating an extraordinary pressure upon the Eisenhower Administration. At midyear 1954 Chiang attempted to tip the scales by a move of extraordinary boldness. Nationalist naval units with air support captured a Polish freighter and a Russian tanker in waters near Formosa. This was not a hit-and-run strike against Communist fishing craft along the coast but an act of piracy on the high seas. This was brinkmanship of a new order.
At what point here would Moscow's obligations to Peking overweigh Washington's commitments to Taipei?
President Eisenhower looked at his military maps with a professional eye and decided that the risks were becoming too great. On September 9 Mr. Dulles flew into Taipei for a five hour talk with the Generalissimo. He flew away again solemnly announcing that "China does not stand alone."
On December 2, at Washington, the Sino-American Defense Treaty was signed. In this new document the Nationalists promised to leap to the defense of the United States if it were attacked by a third party and the United States promised to defend Formosa and the Pescadores. It was reserved to the President of the United States to decide if the offshore islands meaning Quemoy and the Matsus - were to be defended with American help.
Chiang seemed to have agreed that the head of a foreign state could make decisions vital to Free China's welfare. Mr. Dulles on his part had shrewdly moved to sharpen the line of demarcation in the Straits.
The Generalissimo was not to be thwarted; to maintain his regime intact at Taipei he had to prove that he was on the offensive and that return to the homeland was imminent.
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Violating the spirit and the intent of the new Treaty before it had been confirmed by the Congress, he stepped up offensive action far to the north in the Tachen islands lying between Formosa and the Yangtze River estuary.
This renewed and heightened the sense of crisis and the dangers of "brinkmanship" in early 1955. Under instructions from Washington Chiang's American advisors informed him that American naval units would help him withdraw from the Tachens but would not support him there in offensive action. Most reluctantly he ordered the evacuation of Nationalist forces and with them, willy-nilly, brought off some 14,000 Tachen villagers who had no interest whatsoever in being "liberate" in this manner. To them Formosa was foreign territory but they had no choice.
On March 3 the busy Secretary of State again appeared at Taipei to repeat and impress upon the Generalissimo the President's desire to reduce dangerous tensions in the area. For publie reassurance there were formal statements and clouds of rhetoric concerning partnership in defense of Free China and the Free World. The Nationalists were assured again that if Washington deemed an attack on Quemoy or the Matsus a direct threat to Formosa or the Pescadores then all restraints upon Nationalist action would be lifted.
Mr. Dulles needed that clear-cut territorial definition if he were to bargain with Peking. He let it be known by indirection that Communist China might have the offshore islands if it would not attempt to take them by force.
Thereafter there continued to be a great many verbal pyrotechnics and not a little smoke and fire concerning Quemoy. But has Peking at any time been serious there? Certainly the Communists would resist any Nationalist attempt to advance beyond the water barriers, but otherwise the situation worked well to Peking's advantage. If the Communists succeeded in taking Quemoy they would be faced with the need to make good promises to take Formosa as well and that endeavor would certainly mean the quick destruction of Chinese cities and industrial
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concentrations everywhere in China. They gave some indication of their contempt for Chiang's position when they instituted the ridiculous Monday-Wednesday-Friday bombardment schedule at Quemoy as if daring Chiang to waste his resources on Tuesdays, Thurdays and Saturdays.
Meanwhile the Nationalists used Quemoy as a major propaganda resource. An enterprising Formosan once counted the published records of more than two thousand foreign visitors flown over from Taipei within a short space of time to see how seriously Chiang is determined to "retake" the continent. At Tokyo Formosans speak of the offshore islands as "Chiang's Quemoy-Matsu National Park." Mr. Dulles was photographed there, looking grimly impressed.
Formosan leaders in exile watched all of this with close attention. They appreciated Dulles's efforts to sever the links with the mainland but they were baffled by fulsome praise of Chiang's moral leadership in the Free World and of Formosa as a symbol shining before all freedom-loving peoples. They were aware of Mr. Dulles's occasional hints that UN action and a plebiscite might provide solution for the Formosa problem; none knew what form the plebiscite might take nor what choices might be placed before the Formosan people.
Getting at the Facts: The Conlon Report
As Formosa's "Republican Decade" drew to a close the Senate Committee on Foreign Relations at Washington determined to probe the realities of the American position in Asia if this could be done. A team of specialists was asked to bring in a report on the facts and an analysis of the problems.*
* The Conlon Associates group produced the study under the title U.S. Policy Asia. Three University of California specialists were the principal team members. Professor Richard Park prepared the section on South Asia, Professor Guy Pauker wrote the section on Southeast Asia and Professor Robert A. Scalapino prepared the section on Northeast Asia, with subsections on "Communist China and Taiwan."
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On November 1, 1959, the Senate Committee published the Conlon Report.  This dispassionate and orderly presentation provided a fresh breeze to disperse the clouds of diplomatic and military rhetoric through which the Foreign Relations Committee had been so long groping its way. The basic issues could never be quite so confused again.
The emergence of a strong Communist China was recognized by the reporting specialists. Peking was rapidly establishing its claim to be a world power. It could no longer be described in Chiang's terms as a temporary accession of "bandits." To the population of 660 millions there must be added each year millions more. A highly developed organization of economic manpower and natural resources was backing up an army in excess of 2,500,000 men.
Against this formidable power unit the United States had been persuaded to pit Formosa with a deeply divided population and an army far too small to make headway on the mainland, but much too large for the island economy to support. Formosa, to keep afloat, was wholly dependent upon heavy American subsidies.
The Conlon Report noted the unrealistic military ambitions of the dominant minority, and the gap between this minority and the Formosan natives. It warned of Communist appeals to homesick mainland Chinese, urging them to come home where - Peking said -"all will be forgiven."
On the other hand, the Formosans want to stay on Formosa and for them to talk of "return to the mainland" is meaningless. Among the Formosans communism has little appeal; the local ideal is autonomy or independence under a guaranteed neutrality.
The Report examines and deflates the argument that Formosa as "Free China," has appeal for overseas Chinese living in other parts of Asia; it is scarcely a "rallying-point for freedomloving Chinese." It warned of the danger attending American insistence that Chiang's government is the "Government of China"
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and that Taipei alone can be recognized in the United Nations.
In presenting policy alternatives the authors suggested that the United States should cancel commitments involving the offshore islands and should see to it that the Nationalists withdraw. Disengagement there and a clear line of demarcation in the Straits are essential if policies are to be realistic and practical.
It was observed that if Formosa could be held neutral for a sufficient period the mainland refugees would be absorbed by the island people. On the other hand the Report warned that a serious crisis at some unexpected point might call for swift decisions at Washington. The succession problem is a major danger point.
An oblique reference to Chiang Ching-kuo and his clique was made in these words:
In the event of a bargain between some political leaders on Taiwan and the communists, to be sure, the United States might be placed in an extremely awkward position whereby it would have to decide hastily whether it should intervene in an attempt to protect the Taiwanese right of self-determination. 
The Conlon Report proposed a Republic of Taiwan under an American guarantee of its defense and of assistance to all mainland refugees who would wish to return to China proper or go elsewhere overseas. To propose the transfer of Formosa to Communist China in seeking a general settlement in Asia without the consent of the people on Formosa would be an "immoral act" and would seriously undermine American relations with all smaller countries who look to the United States for aid in maintaining independence.
The Taiwanese people themselves have given considerable indication of wishing to remain separate from the mainland and could be tested by plebiscite if this were agreed.