A Government of Merchants


The KMT Military Scavengers

FORMOSAN ENTHUSIASM FOR "liberation" lasted about six weeks. Posters began to appear here and there lampooning Nationalist soldiers and showing Chen Yi as a fat pig. He was in fact short and fat, beady-eyed and heavy-jowled, an easy target for caricature. "Dogs go and pigs come!" was scrawled up everywhere on Taipei's walls and heard everywhere in private conversation. "At least the Japanese dogs protected the property!"

There was ample cause for disappointment. Word that Formosa offered unimaginable riches spread quickly on the mainland. Thousands of carpetbaggers streamed in, coming principally from Shanghai. Those who could afford it bought or bribed their way across aboard American military aircraft in our shuttle service, with such success that at times members of the Army Advisory Group, traveling on legitimate business, found it difficult to obtain passage. The majority of Chinese, less fortunate, crossed the rough channel waters aboard junks.

Looting was carried forward on three levels. From September, 1945, until the year's end the military scavengers were at work at the lowest level. Anything movable - anything lying loose and unguarded for a moment -- was fair prey for ragged and undisciplined soldiers. It was a first wave of petty theft, taking place in every city street and suburban village unfortunate enough to have Nationalist Army barracks or encampments nearby.

The second stage of looting was entered when the senior military men -- the officer ranks -- organized depots with forwarding agents at the ports through which they began to ship out military and civilian supplies. Next the Governor's own men developed a firm control of all industrial raw materials, agricultural stockpiles and confiscated real properties turned over to them by the vanquished Japanese. By the end of 1946 these huge reserves were fairly well exhausted, and at last in early 1947 the Governor's Commissioners imposed a system of extreme monopolies affecting every phase of the island's economic life. This was Chen Yi's "Necessary State Socialism" in its developed form and the ultimate cause of the 1947 rebellion.

Some 12,000 rag-tag troops had been brought across the channel and dumped on Formosa in the first mass movement of Nationalist forces. They came aboard American ships to Keelung and Kaohsiung. Later additions brought the total garrison to about 30,000 men -- not excessive in a population of some five millions, perhaps, but they were a rapacious lot. At that time Nationalist troops were being paid -if they were paid at all the equivalent of $33.00 per year, including (on Formosa) a special "overseas bonus" copied from the American system. Inflation soon cut the buying power until a month's wages could not buy a day's rations. We had no reason to be surprised when the ill-disciplined, ill-fed and underpaid men pilfered wardamaged buildings and unguarded private property. They were expected to fend for themselves on Formosa as they did on the mainland, and here they did very well.

The pickings were good, but the dirty, illiterate conscripts were objects of scorn and contempt among the comparatively well- dressed, well-fed, "modern" Formosans.

The majority were from hinterland provinces and were unfamiliar with paved roads, with a developed communications system, or with simple mechanical devices which had long since become part of everyday Formosan life. We saw them frequently carrying stolen bicycles on their backs, wandering about in search of a barter exchange or a buyer. They did not know how to ride. One evening, driving along the Tamsui riverroad I found the way blocked and an angry crowd of Formosans quarreling with some soldiers. Newcomers had established themselves that day on confiscated Japanese small craft lying along the seawall. The boat-cables had been carried over the wall and across the main highway to be looped around roadside trees. Then the tide had risen, and the cables had risen with the tide, very effectively blocking traffic on a principal thoroughfare. At Taipei a similar display of unreason took place when the Nationalist Army Signal Corps strung field telephone wires between KMT Army Headquarters and the offices of the American Advisory Group. The wires were laid across the main railway tracks near Taipei station, and of course the first train through put an end to the service. For many weeks crowds of soldiers stood about on the main floor of Taipei's principal department store, gaping at the wonders of an elevator service. There were countless incidents to illustrate the backwardness of the newcomers.

The Formosans laughed, jeered, or were angry by turn. Fortunately few conscript privates carried side arms, and it was not difficult for the Formosans to shout them down in timehonored Chinese fashion. Usually they could be driven off if they tried to help themselves to something without making a payment. But dealing with the officer-class was a different matter. The Chinese Air Force -- the "modem service" considered itself an elite, and the Air Force officers were a particularly arrogant lot. Many officers never hesitated to brandish weapons in an argument. There were hundreds of fieldgrade officers and scores of generals -including the Major General who was on the books and drew pay as "Director of the Taiwan Garrison Symphony Orchestra."*

By the end of November looting had become well-organized and was on a massive scale. Foodstuffs, textiles, and scrap metals were at a premium. Officers worked in small gangs, with conscript help. By sharing a percentage with "higher authority" they could use confiscated Japanese military trucks to move loot to depots from which it was shipped on to Shanghai. The "Peace Preservation Corps" arriving in September had promptly commandeered all of Taipei's garbage trucks, for example, and by late November those that were still able to move were carrying loot to the ports. A Formosan truck owner or driver had to be quickwitted indeed if he were to avoid loss of his vehicle. Meanwhile the garbage piled mountain-high in the streets and the rats had a merry time in the alleyways and houses of Taipei.

Gang-looting was not limited to military officers, of course, but they were made conspicuous by uniforms and by the bold assurance with which they worked at any hour of the day, well armed and confident that they were beyond the reach of civil law. Japanese were particularly easy targets. Some 300,000 civilians anxiously waited repatriation or some definition of their legal status.

While awaiting repatriation, families were expected to remain in their homes until called to the ports for embarkation. General MacArthur ordered the repatriation from Formosa to be delayed as long as possible, for millions of Japanese were coming back to the homeland in the dead of winter to face appalling conditions in bombed Japanese cities and towns. But by the end of December at Taipei hundreds of Japanese had been evicted from their homes, without notice, and hundreds more had their homes entered by armed gangs who stripped the houses of every movable, salable object.

At first the Formosans thought this inevitable, and perhaps fair enough, in light of their own past experiences with the Japanese. But November and December brought evidence that well-armed newcomers drew no fine distinctions in conquered territory. Formosans who lived in Japanese style houses or in semi-Japanese style were especial objects of molestation. By years end it was apparent that no private property was immune. Bribes paid to forestall a raid carried no effective guarantee of later security. There were occasions when two officergangs fought openly in the streets before a property which each had planned to "liberate."

Soon major industrial reconstruction assets were being "liberated." The great Zuiho copper and gold mines near Keelung had at one time produced 20 percent of Japan's total copper ore, and the machinery at the mines was developed to match the wartime importance of such production. Solitary conscripts, on foot, first roamed about the silent unguarded premises, picking up supplies and tools from undamaged machine shops. Then the officer-gangs moved in with commandeered trucks. Soon they had ripped out the heavier machines, removed wiring and all metal fixtures, and shipped the whole off to the ports and on to Shanghai. When I visited the site not long after, I discovered that even the metal door-frames and sheet metal roofing had been carried off, leaving empty shells where important industrial installations had once stood.

In Taipei and Keelung Japanese and Formosan crews worked hard by day, attempting to restore bomb-damaged public service facilities. At night roving scavengers in uniform cut down miles of copper telephone wire, dug up new-laid pipes and fire hydrants, tore plumbing from unguarded buildings, or intimidated guards while the loot was carried out to carts and trucks. Several serious railway crossing accidents occurred before the public realized that the "liberators" were carrying off automatic switch and signal equipment to be sold as scrap metal.

The Japanese Army and Navy had relinquished permanent barracks built to accommodate more than 200,000 troops, hundreds of other military-service buildings, and many thousand acres of land. Despite this, by the year's end Chinese soldiers had overrun schools, temples and hospitals at Taipei and it took most of the year 1946 to get them out. Any building occupied by KMT troops became a mere shell. The great Confucian Temple in northwest Taipei was heavily damaged. A Zen Buddhist temple nearby was totally wrecked, and its contents sold or bartered on the streets. The MacKay Mission Memorial Hospital was occupied for months, stripped of its equipment and all metal fixtures, including doorknobs. Many of the wooden doors, door-frames and stair bannisters were used by the soldiers to feed cooking fires built on the concrete floors. Troops occupied the Mission Leper Hospital near Tamsui.

The higher Chinese civil and military officers were interested in real estate. In the Japanese era every bureau and department of Government maintained handsome official residences, designed to add to the prestige of colonial administrators. The majority of the great private or semi-private corporations -- the Taiwan Electric Power Corporation, the sugar corporation, the fisheries organizations, the banks - each maintained a company residence in town as well as a corresponding mountain house or hotspring villa in the suburbs.

These were now taken over by the high Chinese civil and military officers. In several instances ranking Chinese simply moved into the mansions of wealthy Formosans as "guests," letting it be known that the Chinese Government proposed to seek out and punish all Formosans who had collaborated with the enemy during the preceding fifty years. Several of Formosa's wealthiest men were taken into custody, installed in fairly comfortable quarters at the military headquarters and then, throughout 1946, were "squeezed." They were called upon for "donations" to a great variety of causes, not excluding the erection of a gilded statue of Chiang Kai-shek where once had stood the bronze statue of a former Japanese Governor-General.

The military played a leading role in all this for they symbolized the "liberating power"; by New Year's Day, 1946, Formosans saw "liberation" in its true light. A truck at the gate, a gang at the door, and an agent representing himself to have "high authority" meant eviction on the moment. The reorganization of the economy was rather a matter of civilian controls, but the civilian Commissioners around Chen Yi obviously worked against a military background.

Many civilians on Chen Yi's staff distrusted their own military men. By tradition Japanese houses are surrounded by walls. We had not long been on Formosa when we observed that Chinese civil officers living in confiscated Japanese homes were adding a topping of broken glass to the concrete walls, or barbed wire and spikes to the tops of wooden fences. The Japanese had never felt this precaution necessary while they lived among the Formosans; it was an eloquent if silent confession of the mainlander's state of mind vis-a-vis his own military rabble.


Formosan Reaction to the Nationalist Armed Forces

The Governor found that he faced no organized opposition. The Japanese troops were being removed, there were no Formosan military units and very few Formosans in the policing agencies. The Formosan civil population was well disciplined and law-abiding. There was no Communist threat.

There was little need of a large military garrison. Though published figures were notoriously inexact, we believed that there were about 30,000 mainland troops on the island throughout most of 1946.

In January General Chen announced a plan to conscript Formosan youths, beginning in September. They were to have opportunity to serve the Motherland in repressing Communist rebels and bandits on the continent.

There was a prompt public outcry which appeared to astonish the Governor-General. Formosan spokesmen took to the platform to denounce conscription before a peace treaty confirmed the transfer of sovereignty from Japan to China. They assured the Governor they would be happy to form a volunteer Formosan Home Guard for duty on the island, but they were not prepared to see Formosan youth swallowed up in the civil war. They suggested that a Home Guard recruited on Formosa could defend the island, thus releasing the Chinese garrison forces for duty on the mainland. The press kept the issue before the public for many weeks. It was widely believed that Governor-General Chen simply wished to ship out as many young men as possible, for by tradition the Chinese Government sent conscripts and generals into distant provinces in order to discourage thoughts of rebellion on home territory.

September, 1946, came and went and nothing more was heard of the conscription program. Relations between the Formosans and the occupying garrison forces had gone steadily from bad to worse. Here, on Formosa, clearly defined and well reported, was a demonstration of the fundamental reasons Chiang Kai-shek and his Nationalist Party Government and Army were unable to secure popular support on the mainland, and so lost China.

Unfortunately, in the early months of the Occupation the Formosans openly laughed at the incoming officers and men, mocking their lack of discipline and their manifest ignorance of simple modern technology. I once observed an officer on foot, wheeling a bicycle at his side. Behind him stumbled a tearful, angry small boy who shouted to the world that the officer had stolen his bicycle -- the precious family bicycle -- and he wanted it to be returned for otherwise be could not go home. Older Formosans took note and the officer saw that he was about to be stopped. He therefore suddenly attempted to leap on the machine and ride away. But after wobbling a few feet he fell off into a fairly deep roadside puddle, The crowd hooted with laughter as the officer got to his feet and went off hastily, cursing and dirty, leaving the bicycle where it lay. On another day I saw a car grossly overloaded with mainland Chinese officers moving along the Keelung highway. One back wheel was about to come off, the car lurched grotesquely from side to side, but the driver made no effort to stop until, too late, it swerved about and collapsed on the roadway. The roadside crowd instantly caught the significance of this odd behavior; the mainlanders obviously knew nothing about cars. As the shaken passengers extricated themselves the Formosans laughed loudly, shouting coarse jokes about pigs breaking out of baskets. The Chinese were beside themselves with rage and moved off, cursing the Formosans. Fortunately they were unarmed. They had suffered an injury far worse than broken bones; they had lost face.

These confrontations were frequent and took place everywhere in the islands. For many years the mainland Chinese had had to endure the condescension implied in Western attempts to help "backward heathens" develop modern techniques, but here they were being laughed at by their own people and an inferior people at that. That is, I think, one of the important keys to the situation on Formosa in all that followed.


The Stockpile Bonanza: Something for the Men at the Top

The loot taken in petty theft from local shops and homes by these plodding garrison soldiers was as nothing when compared with the plunder shipped from the island by Chen Yi's Commissioners and by civil and military officers in the higher echelons of Government and Army.

Japan's leading authority on the subject of the confiscated properties -- an economist directly involved with the registration and transfer of titles -- estimated the total value of military and civilian properties handed over to the Nationalist Chinese. Using prewar "original cost... figures as a basis (i.e. not the inflated values at Shanghai or Taipei after 1945) a most conservative estimate showed the value of non-military confiscated properties to be in excess of one billion dollars. In addition the Japanese Army and Navy had each accumulated enormous stockpiles of foodstuffs, clothing, medical supplies and equipment other than arms and ammunition. These had been destined for the vast Japanese war-front in southeast Asia and the Indies, but had not moved beyond Formosa. The total value of military supplies other than arms and ammunition was placed at two billion dollars at local market values in late 1945. The value of arms and ammunition stockpiled on Formosa is not known.

These enormous accumulations began to move out of the island in the first months of Chinese administration. Chen Yi's men claimed that as good patriots they promptly ensured the flow of military supply to the Nationalist Army fighting Communists on the mainland, but we have ample reason to believe that there was heavy "diversionary action'' along the way to the official war-front.

A massive raid upon accumulated foodstocks late in 1945 precipitated one of the first major crises in Formosan relations with the new regime.

At the surrender the Japanese military had supplies sufficient to feed 200,000 troops for two years, or 250,000 men for a year and a half. They had anticipated a long siege. In addition there was on Formosa a very large backlog of unshipped rice and other foodstuffs which had accumulated near the ports waiting transport to Japan proper.** The 1945 crops had been greatly reduced because of the scarcity of chemical fertilizers, but even so there was an abundance.

On an earlier page we have noted that General MacArthur wished to delay repatriation of 500,000 Japanese from Formosa. The first postwar winter was grim in Japan proper, a winter of hunger and hardship and cold. On Formosa the Japanese could be adequately sheltered and fed.

The Chinese entering Formosa demanded the immediate transfer of all military stockpiles, including rations and rice. The Japanese officers hesitated to comply until the American Advisory Group secured a Chinese guarantee that ample reserves would be maintained and would be constantly available until the last Japanese soldier had left the island.

The guarantees proved worthless. We have already noted that in late December senior Japanese officers reported military food reserves were being removed from storage at an alarming rate. Some supply was being sold locally by individual Chinese officers who had access to it, and great quantities were being shipped out. Nonmilitary food reserves, too, were vanishing. Rumors of an impending food crisis were circulating everywhere. Interned and restive Japanese soldiers could not be expected to remain unmoved if word came of violence done to the unarmed Japanese civilians, or that they themselves were about to starve in the midst of plenty. If food riots occurred at Taipei it was certain that the Japanese civilian population would be the first to suffer. As we have seen, for this reason repatriation was completed at the end of March.

Every Formosan household felt the effect of a sudden loss of grain reserves. Rice could be obtained, but only at exorbitant prices. Farmers who had supplies produced on their own lands were in constant fear of confiscation. In truth the Formosans had an ample supply of vegetables, fruits and other grains to tide them over to the spring harvest, but rice was the staple, and this was the first rice shortage in local history. Without rice the people felt deprived -- and frightened. China's chronic famine conditions were well known.

The Formosans' ancestors had left mainland China to get away from chronic hunger and bad government, but now the one was following swiftly on the other. There was more anger than fear in their hearts, however; they knew the fields were producing and that huge supplies of grain were leaving Formosa. Workmen at the docks and warehouses carried it aboard ships and junks day after day. The movement of rice from the island could not be hidden.

To loud demands for action the Government first replied with flowery talk of "patriotism" and "food for the Army, defending Formosa from Communism," and then Chen lost patience with the critics. He sharply denied Government responsibility, countering with charges that the Formosans themselves were selfishly hoarding grain. Undoubtedly some Formosans were, but the quantities in private hands were insignificant.

When the Government took action it was not at all what the Formosans expected; Chen launched an island-wide rice-collection program, ordering prominent men to become chairmen of local committees. This was to make them appear responsible for any continuing shortages. The Formosa Garrison Commander (General Ko Yuen-feng) was then ordered to enforce stringent anti-hoarding regulations, and the police were instructed to enter and search without warrant.

With rice-collection in the hands of the police and the Army no more than a hint was necessary in most cases to bring forth cash or material "gifts" from private rice dealers whose records were alleged to be unsatisfactory. Extortion was the order of the day; for example, I learned of one dealer whose stocks were checked and recorded on Tuesday, but on Friday (after he had made and recorded legitimate sales) a second check by a different police unit found his books "unsatisfactory." He was arrested, threatened, and forced to pay over a heavy bribe to secure release. His rice stocks were confiscated.

By this time (early 1946) Chiang Kai-shek's "Blue Shirt" gangsters had begun to come over from Shanghai. With local gangsters known as loma or "tiger eels" they were used to incite riots and raids on private warehouses. General Ko promised immunity from arrest to anyone who broke open private buildings and revealed hoarded stocks. In other words, within four months of the formal surrender we observed Shanghai's metropolitan gangsterism introduced at Taipei, with Party and Army connivance. In retrospect the Governor's anti-hoarding campaign appears to have been one of his earliest moves to discredit and destroy the educated, middle class which had begun to emerge in the late years of the Japanese era. These were the gentry, small, independent landholders who also had modest investments in shops and small industries in the towns. They represented the articulate Opposition. The Nationalist Government, Party and Army were responsible for food shortages and the threatened crisis, but measures taken to cope with the situation were clearly designed to set Formosans one against another.

Military supplies were shipped out to meet the Generalissimo's personal interest in power, as such, rather than in wealth. The huge stockpiles of food could be divided and subdivided to pay off the thousands of military officers, Party men and bureaucrats who were involved in the affair. There were other valuable reserves of industrial raw materials and processed goods lying in storage. Japanese economists engaged in the formal transfer of confiscated properties estimated that across the board there were sufficient stockpiles to sustain most industries for about three years, and that within this period, under proper management, the Formosan economy should be recovering its normal productivity-potential. On the other hand they warned the Chinese that under the circumstances reserve stockpiles represented the operating capital required to pay for rehabilitation. They were bluntly told that it was none of their concern.

The sugar industry was of course the great prize. In 1939 Formosa had produced in excess of 1,400,000 metric tons of sugar. In 1947, the first full crop produced under Chinese management yielded only 30,000 metric tons. This was about the amount which had been produced in 1895 before the Japanese developed the industry, and a dramatic demonstration of the fate of the economy in Chinese hands. Production of sugar had fallen off in wartime because of labor shortages, a reduction of crop area, and lack of fertilizers. Nevertheless, huge quantities of raw sugar were stockpiled in 1945, waiting shipment to Japan's refineries. Most of the great cane-mills had suffered relatively little bomb damage, although they were suffering from wear and tear and from lack of proper maintenance. But in 1946 the sugar reserves which should have paid for rehabilitation were gone.

Immediately after the formal surrender the Executive Yuan (of which T. V. Soong was President) ordered massive sugar shipments. From Hong Kong came reports that great quantities of this raw sugar were brought there directly to private warehouses. The lowest estimate was 150,000 tons, the highest 600,000 tons. Obviously no one knew the exact figure, but just as obviously Formosa's sugar reserves had disappeared.

In this instance the Formosans held Madam Chiang's brother T. V. Soong responsible. Formosan attitudes toward the Chiang-Soong Family were conditioned by such allegations.

Stockpiles of every description left the island in this fashion. For example, in good years Formosa had produced nearly three million tons of coal mined in and near Keelung, the port city. In 1945-1946 reserves which should have been apportioned to local small industries went instead to Shanghai. For one thing the Taiwan Railway Administration was not interested in handling coal when passengers, baggage and other types of freight were more profitable. Other offices in Chen Yi's administration saw in coal a source of enormous profits. As cold winter came on in Shanghai, in late 1945, Formosan coal commanded fantastic prices in the metropolitan market. Mainland Chinese at Taipei and Keelung bought up all the coal they could, but paid absurdly low prices for it. Formosan mine operators at last threatened to suspend mining until written contracts guaranteed a reasonable percentage of the profits. The Government stepped in, offered to have one Government agency of the Department of Industry and Mining buy up the coal on these terms, establishing in effect a monopoly on the market. The Formosans, satisfied, signed up and began delivering coal to the Government agency which they assumed would sell the coal at a handsome profit and share the proceeds with them. To their great chagrin, however, the Governor's men in the purchasing agency promptly sold the coal to another agency in the Government (a purely paper transaction) at a ridiculously low profit. Then -- in strict accordance with contract terms -- they paid off the Formosans at the agreed percentages. The second agency of the Department of Industry and Mining then shipped the coal to Shanghai for an astronomical profit.

In Japanese hands the official monopolies of Salt, Matches, Liquor, Camphor, and Narcotics had yielded a very large per cent of the Government's total revenues in Formosa. In late 1945 the stockpiles of raw materials and finished products were handed over to Chen Yi. Here again was a windfall beyond description.

After the Transfer few of these stockpiled materials reached the open market through legal channels. In most instances we have records of quantities surrendered (records made by the Japanese), but only the vaguest indication of what became of them. Of 423,000 tons of camphor surrendered, for example, an official report shows that only 400 tons were actually refined in the first half-year of the Chinese occupation. We do know that very large shipments left the island, assigned to private warehouses in Hong Kong. Nearly 3,500,000 cases of matches were surrendered, but an acute shortage of matches developed in Formosa in early 1946. (At the first People's Political Council, in May, the Government spokesman explained this, saying that the Government had been able to distribute only 1473 cases in the first six months "because of lack of adequate transport.") The match stockpiles, too, had gone to the mainland.

The fate of the Narcotics Monopoly stocks were of the keenest concern to thoughtful Formosan leaders. The very existence of the narcotics industry as a State concern had been always a source of great friction between Formosans and the Japanese administration. In the decade before the war the Japanese government did not publish figures showing the total quantities of narcotics raw materials or finished products produced annually but for a time made public figures showing the stocks carried over from one year to the next. In other words, we know what was left over after the year's work was done, and from this must guess the order of magnitude of the total production and of the normal stockpiles.***

It is a matter of record that at the end of 1934 the Taiwan Monopoly Bureau carried over a stockpile of 67.9 metric tons of raw opium and 19 metric tons of prepared opium. At the end of 1935 it carried over a stockpile Of 4245 metric tons of coca leaves, 606 metric tons of crude morphine, and 125 metric tons of crude cocaine. Ten years later Chen Yi announced that the Japanese had surrendered only 9720 pounds of opium and "a small quantity" of cocaine. These narcotics stocks, he said, had been promptly divided into three parts; some had been released to the local Bureau of Health, some had been sent to Nanking for use in the Army medical services, and the balance had been destroyed. Henceforth, he said, the manufacture of cocaine and coca derivatives would be given up. His agents had assumed control of the coca plantations in Taichung and near Taitung.

For many years Formosa was considered one of the great narcotics processing centers in the world and a major source of supply for illicit traffic in drugs. On the assumption "This is China now," our consul on Formosa in 1946 decided that what the Chinese did with the Narcotics Monopoly was a question of no concern to the American Government. A United Nations report in 1949 noted that the Chinese Nationalist Government had failed to submit reports on the stocks, production or use of narcotics in Formosa since the Surrender in 1945.


The Chinese Commissioners Prepare to Build a New Formosa

On paper, for the public records, a Table of Organization clearly defined the new administration. It looked well-on paper- for it provided for all branches of government needed to supply a highly complex, modern technological economy and for all the social services inherited from the Japanese period.

Chen Yi surrounded himself with a remarkable group of Commissioners and staffmen. The majority had been educated in mission schools in China, in Japanese technical schools or universities, or in western Europe or America. Control of the basic economy lay with the Commissioners of Finance, Communications, Industry and Mining, and Agriculture and Forestry.

The Governor's first choice for the Communications post vital in an island economy - was a man named Hsu, long associated with T. V. Soong's China Merchant's Steam Navigation Company, the "CMSNC," which dominated shipping in the rivers and coastal waters of China. The nomination provoked such an outcry that Hsu's name was withdrawn. He went instead to Shanghai to become Managing Director of the CMSNC, but it was arranged subsequently to have the Shanghai offices of the Taiwan Government-General located in the CMSNC Building on the Bund. To replace Hsu, Chen Yi chose -- or had chosen for him -- one of his associates in Fukien days, Yen Chia-kan.

Throughout the period of Chen Yi's rule at Taipei, Yen Chia-kan was key man, serving first as Communications Commissioner, then as Finance Commissioner, and at times as Acting Civil Administrator. Formosans liked him as a person rather better than they did any other Commissioner, for he was never arrogant and seemed always sincerely interested in whatever problem was at hand.

Other Commissioners were less successful in personal public relations. Near Yen stood Pao Ko-yung, a rather elegant young man who had been educated in Europe. He was brought to Formosa as Commissioner of Mining and Industry. His wife's sister was the wife of the Managing Director of the China Merchants Steam Navigation Company and his brother was Chief Liaison Officer for the Formosan Government at Shanghai, with offices in the CMSNC building. Chen Yi's Director of Railroads (Chen Ching-wen) was ultimately to become Commissioner of Communications and Chairman of the Board of Directors of the CMSNC.

When Commissioner Yen moved from Communications to Finance (in early 1946) his place was taken by Jen Hsien-chuen who had been educated in Japan and in Italy and had served briefly in the Highway Bureau of the Central Government. The Commissioner for Agriculture and Forestry was Chao Lien-fang, Ph.D., a much older man, who had graduated from the University of Wisconsin.

These were the key men controlling Finance, Transport, Industry, and Agriculture. Their experience abroad enabled them to meet and manipulate American visitors with remarkable success. So many of our fast-moving visitors from Washington seemed to be persuaded that a foreigner's command of English certified a democratic outlook on life and that a period of student life in the United States automatically guaranteed a pro-American point of view. The Commissioners had mastered the art of granting interviews, passing out succinct statistical summaries, and persuading their guests that things were moving forward on Formosa at an encouraging pace. But long experience with them in official business and unofficial social life made it clear that flowery public references to "our Formosan brothers" only thinly concealed a contempt for the "barbarian" island people, and disguised full-time dedication to the task of removing island wealth as rapidly and as thoroughly as possible. It was not what the Commissioners said they were doing in 1945 to 1949, but what, in fact, they did.

The Government's printed Table of Organization was neatly arranged, but in practice the lines of authority were blurred by intense rivalries and overlapping functions. There were Army groups and Party cliques, civil-military rivalries and factions based on regional origins and interests (Shanghai versus the capital, Fukien versus Chekiang or Kwangtung, for example), and underlying it all was the essential division of interest -- the Formosans versus the mainland Chinese.

Each Commissioner had a personal following and a host of friends and relatives on the payroll. Some, however, were much more flagrant than others in nepotism. For example, the Secretary-General or Civil Administrator (General Keh King-en) promptly appointed seven of his family members to important and lucrative posts for which they had not the slightest qualifications. Kaohsiung's Police Chief was shown to have more than forty relatives on the payroll. Some mainland Chinese drew pay for purely ceremonial duties -- such as the Major General listed as "Director of the Taiwan Garrison Symphony Orchestra" who was neither soldier nor musician. The Director of the Taiwan Trading Bureau -- one of the most lucrative posts -went to a man said variously to be Chen Yi's nephew or a natural son. One prominent Commissioner was alleged to have a concubine on the Department payroll, listed a "technical specialist."

The Formosans delighted in publishing facts, gossip and allegation, which would cause the newcomers to lose face, but the situation as a whole was too serious for laughter. The economic burden fell on them; they were about to have the "Fukien experience" of Chen Yi's "Necessary State Socialism."

To carry on administrative work for which the Japanese had employed 18,300 people, Chen Yi's reports showed 43,000 names enrolled by midyear 1946, and these lists were believed to be grossly inaccurate and understated.

As window-dressing five island-born men were appointed to offices at the second and third levels of administration. None had lived on Formosa for at least fifteen years. They were strangers among their own people and by the middle of 1946 they were spoken of contemptuously as "running dogs of the Kuomintang." At midyear 1946 Formosan names were shown as a majority on the Government payroll, but these were the messenger girls and janitors in the Taipei offices and the clerks and janitors in the village offices across the island. The effective administrative posts -the jobs that meant something were all in mainland Chinese hands.

In October, 1945, all Japanese were promptly stripped of authority and dismissed from the Government and industry as a formality, but with equal promptness some 30,000 (principally in technical services) were retained as "advisors" on a temporary basis. This was an admission that the Chinese were not qualified to administer Formosa, and so to save face the Japanese advisors were required to sign petitions begging for the privilege of becoming advisors, and in effect waiving most of the normal rights of a citizen.

As a matter of fact immediately after the surrender some 50,000 Japanese had voluntarily petitioned for the right to stay in Formosa, their lifelong home. But a few weeks under Chen Yi persuaded them to change their minds; war-torn Japan, public charity, and the American Occupation seemed the more attractive choice. By late 1946 only about 2000 Japanese remained on Formosa in "advisory" services.


Nationalist Party Men as "Tutors" in Formosa

The Governor announced that the "backward Formosans" would be trained to replace Japanese clerks and technicians, and to this end inaugurated a "Provincial Training Corps Program" on December 10, 1945. The ninety-day course included lectures on Chinese literature, Sun Yat-sen's doctrines, the words and deeds of the Arbiter-General (Chiang Kai-shek) and other spiritual nutriment of this high order. There were scattered lectures on national geography, history, politics and economy, and a few on technical subjects such as accounting and meteorology.

This training program, too, proved to be mere windowdressing. Of the first class of 375 Formosans who finished the course, few were actually employed. They complained bitterly that while being required to take these courses, the offices vacated by the Japanese were rapidly filled by newcomers from the mainland.

In early 1946 the Government became top-heavy with inexperienced mainland people, and the Formosans were relegated to menial posts as clerks, office-runners, and the maintenance staff jobs. Gradually they were dismissed from even these positions in order to make room for immigrants.

The Nationalist Party organization actually played a minor role in 1945 and 1946. The mysterious "Colonel Chang" who had arrived on September 5 emerged later in the year as chief organizer for the Kuomintang Youth Corps which was Chiang Kai-shek's version of the Hitler Jugend or Stalin's Komsomol.

There was a brief flurry of interest, of cooperation at the rallies and of enlistment. The Nationalist Party had long been advertised as the soul and conscience of "New China." Chiang Kai-shek was its Tsungtsai or Director-General, and Sun Yat-sen's Three Peoples' Principles (San Min-Chui) were its Holy Writ.

The three principles sounded just right in Formosa after fifty years of Japanese rule. They were expressions (in slogan form) of Nationalism, People's Rights, and the People's Livelihood. In 1945 this was taken to mean that the Nationalist Party and the National Leader would work energetically to restore Formosans to Chinese nationality, would ensure popular rights by creating a democratic and representative system through which Formosans would govern Formosa and represent Formosa in the Central Government, and, lastly, that the Party would foster the rehabilitation and development of the island economy.

In practice they quickly discovered that lines of distinction between Government interests and Party interests were not clear. The Party members were an elite, and the Government was expected to serve and finance the Party. In its turn the Party was organized to exalt the authority of the Tsungtsai or Director-General. Just as there could be no Nazi Party without Hitler, or Fascist Party without Mussolini, or Falangist Party without Franco, so there could be no Nationalist (Kuomintang) Party without Chiang Kai-shek.

The Formosans found many of the Party's ceremonial requirements much too similar to the ceremonial Emperor worship of the Japanese State cult. That routine had been costly and burdensome, and they were not happy to resume it under a different name.

For example, in the Japanese era a portrait of the reigning Emperor had to be placed in every school. It had to be treated with the utmost show of reverence. And there were weekly services at which all government employees and school children had to bow reverently before the imperial portrait or toward the imperial palace at Tokyo, "worshiping from afar." Now, under the new Nationalist regime, portraits of Sun Yat-sen, the "National Father" or of Chiang Kai-shek, the "National Leader" had simply replaced the Japanese Emperor's portrait everywhere. On Monday morning in every week, all Government offices, all military posts and all Party organizations were required to hold an hour-long Memorial Service. Participants were required to bow three times before Sun's portrait and before the flags of the nation and the Party. They were required to sing the National Anthem which was the Party Song. School children, Youth Corps members and many other groups were required to show the outward forms of respect to these symbols of Party, Army, and Government.

Soon Party offices were opened throughout the island. Posters, pamphlets, slogans, mass rallies and drills were introduced. Leather-lunged speechmakers harangued the meetings, trying to induce "slogan-thinking" and acceptance of a blind conformity to the will of the Party Leader. Too much was said in praise of the Party and the Generalissimo, and too little said concerning the rehabilitation of Formosa or the depredations of the KMT Army.

When goons in great number came in from the back alleys of Shanghai, Party organizers began to use strong-arm tactics in smaller towns. The truth began to dawn on the Formosans. Attendance at Party meetings and Youth Corps rallies melted away. There were too many demands for the payment of dues and of special fees. When organizers began to demand a share in profitable local business ventures they were astonished by the vigor with which the Formosans objected, and the speed with which these attempts were publicized in the local press.

The Party's share in the division of movable properties and of confiscated real estate was considerable. A number of theaters were handed over to the Party -- properties which could be made to yield returns when Party meetings were not in session. By late autumn, 1945, the Party had had its day in Formosa, and began to be the object of sharper editorial criticism in the press.

This caused loss of face; Party spokesmen and the Government newspaper charged angrily that the island people were tainted by long association with the Japanese, that they lacked "true national spirit," and that they discriminated willfully against their brothers from other provinces.

Throughout 1946 the Party was not firmly enough entrenched nor sufficiently important to employ forthright liquidation tactics where it wished to silence an opposition press or destroy a critic. That came later. For a time Party officials and unit organizations merely assisted Chen Yi in setting up his disciplinary internment camp in the Taipei suburbs, called publicly a "rehabilitation and guidance center." By a twist of the vagrancy laws some of the most stubborn Formosan landholders and intellectual leaders were forcibly subjected to periods of "political re-education." This meant that their families were subjected to blackmail and thinly veiled threats of worse things to come if proper "appreciation gifts" or other forms of bribery did not change hands while the head of the house was being reeducated.

Nationalist Party officers assisted the police. in checking the credentials of all Formosans who wished to vote, or to become candidates for office, or to stand for election to the Peoples Political Councils which came into being in 1946.

By promising these elective councils Chen Yi inadvertently made a major mistake. On the one hand the Governor-General attempted to make great propaganda by generously offering to establish the Councils at once "to hear the people's opinions," but on the other, the first elections were held and the Councils convened before the Party could get a firm grasp on the machinery. Many men who later proved wholly undesirable from the Government's point of view were elected to two-year terms before Party officials could properly check personal records and send the Party goons into action.

For the moment they were too busy dividing the spoils.


The Confiscated Japanese Property Deal

Having organized the shipment of stockpiles, provided jobs for deserving relatives and friends, and placed many Formosan leaders in "rehabilitation centers," the Governor's Commissioners settled down to the happy task of managing confiscated properties. They had found Peng Lai, the fabled islands of gold and silver in the Eastern Sea.

Immediately after the surrender at Tokyo Bay the Japanese at Taipei formed a Property Registration Commission to prepare for the transfer of titles to the Allied Powers or to the Chinese National Government, representing the Allies. Many types of wealth were surrendered. For our purposes we can group them under three general categories.

Government properties included all those owned by the national administration at Tokyo or by the Taiwan Government General, or by these two acting in partnership. This group embraced all public lands and buildings, the State-owned transport and communications systems including railways, radio stations, public telegraph and telephone systems, the police telecommunications systems, port installations, and many other less notable properties. State-owned productive enterprises included the salt, liquor, camphor, match and narcotics monopolies. The State's share in great quasi-public corporations brought them into this group, which included the Bank of Taiwan, the Taiwan Development Company, the Taiwan Electric Power Company and other large corporate bodies.

Public social welfare institutions and properties made ready for transfer included the schools, hospitals, research stations, farms and forests, laboratories, training institutes and many other small agencies and properties of a public-service nature. Surrendered financial assets included postal savings institutions in which both Formosans and Japanese had deposits, insurance agencies, and many other investment and credit institutions holding the life savings of persons who had considered Formosa to be "home."

Private properties made ready for transfer included corporate and individual shares in companies producing sugar, timber, pineapples, chemicals, and minerals which were the colonial subsidiaries of great Japanese corporations or of the Imperial Household. The petty private holdings of some 300,000 Japanese who lived permanently in Formosa included residential properties, shops, printing presses, theaters, private clinics and hospitals, restaurants, and hundreds of small mercantile and industrial units of every description.

Japanese civilians preparing for repatriation were notified that they could take with them only property which could be carried in two hands and upon the back. All else had to be sold, surrendered, abandoned, or given away. Here was to be no two year grace period such as the Japanese had granted the Chinese in 1895, but at least they were given an opportunity to register their losses, in the faint hope that someday they might lodge claims against the Japanese Government at Tokyo for restitution or reimbursement.

The most difficult problems arose with those properties in which there was joint Japanese and Formosan interest or title. Many of these partnerships had come into existence by mutual agreement in the last decades of the Japanese era, although there were some noteworthy instances in which prospering Formosan establishments had been obliged, under duress, to accept Japanese partners. All such jointly owned properties the Chinese insisted -- must be subjected to total confiscation on the grounds that they showed evidence of "collaboration with the enemy."

When the Japanese Property Registration Commission completed its work, qualified staff economists estimated the total value of nonmilitary property made ready for transfer at two billion dollars at prewar rates of exchange. If we halve this sum (to mitigate the charge that the Japanese must be expected to exaggerate their losses), we are still confronted with a billion-dollar figure. Under circumstances then affecting values at Shanghai and Taipei it was impossible to put a realistic valuation on Formosa as a whole, and upon the confiscated properties. Here was in effect an enormous reparations transfer of four or five billion dollars' worth of properties (excluding arms and ammunition), by Japan to China. Under proper management Formosa's modern economy could have been made to generate great surpluses needed in the rehabilitation program for China proper, and the island could have become an invaluable training ground for tens of thousands of Chinese technicians needed in every mainland Chinese province.

The "China First" men in the Department of State at Washington determined not to have Formosa discussed as a "reparations" payment to China; if it were discussed at all, it was considered "stolen property" now restored to its rightful owner.****

The Government and people of China proper derived very little benefit from this transaction.

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* There was indeed a Taiwan Symphony Orchestra, formed principally by Formosan graduates of the Ueno Conservatory of Music at Tokyo. Immediately after the war a Hungarian refugee from Shanghai took over the baton, and the organization was given the use of an abandoned Japanese Buddhist temple. Interference by the nominal Director -- the Major General -- soon wrecked the organization.
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** Formosa's annual prewar production had reached 1,600,000 metric tons. Roughly 50 per cent of the annual crop was consumed locally by the population of five millions, who lived well.
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***All Japanese figures in this field must be taken with great reserve, for a League of Nations inquiry brought the unsavory Formosan narcotics manufacturing organization to international attention, and Japanese figures after 1932 showed a very sharp decline, not to be taken too seriously. Narcotics were too important as a weapon used on the Asian mainland. Consumption was most strictly controlled within Formosa itself.
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**** On one occasion at Washington I attempted to discuss the question of Formosa as "reparations," but the officer on the China Desk in the Department turned to his phone to discuss at very great length the interior decoration and appointments of a new four-motor plane which we were about to give to the Generalissimo and Madame Chiang. Since the phone conversation had to be worked immediately into a Memorandum for action, I was waved on to another desk and another day.
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Materials for these chapters [chapters 5 and 6 -- M.S.] were drawn from private journals, from UNRRA reports, and from the Taipei press which published, piecemeal, the so-called "Take-Over Report," an accounting of properties transferred by the Japanese Property Custodians to Chinese officials in 1946.