China at War 1936-45
In September 1931, Japan occupied Chinese Manchuria, beginning what is called in Japanese history the Fifteen Year War, which would see Japan take up much of China from 1937-45, expand into southeast Asia starting from July 1941, engage the U.S. in various battles in the southern Pacific, and finally surrender. In China, 1927 to 1949 saw one war of foreign (Japanese) invasion, formally termed the Eight Year War (1937-45), and two civil wars between the Chinese Communists and Nationalists (1927-36, 1945-49).
In the face of Japanese invasion of China, the United States condemned Japan and extended financial support to China, primarily under a category called "Lend-Lease," a term coined to refer initially to Americans lending and leasing WWI destroyers to Britain during the Battle of Britain (1940-41) in World War II. The Lend-Lease program was then extended to many other countries under the invasion of the Axis Powers, including China. Eventually, all the money and goods lent during the war became free gifts from the U.S. to these embattled countries. The Nationalist government heavily lobbied the U.S. for support. In 1942, Madame Chiang Kai-shek herself toured the U.S., lobbied the U.S. congress, and promoted the United China Relief. The "China Lobby" still exists as a term today to refer to the lobbyists for Taiwan--where the Nationalists left for in 1949--in the U.S. Congress.
Wartime China’s financial dependence on the U.S. (over $3.8 billion in goods and cash, 1937-45) was a new source for Chiang Kai-shek’s revenue and a substitute for the ineffective Shanghai merchants’ contributions in bonds and extortions. It is also a good example of the perennial government corruption that has plagued Chinese governments for centuries (today it is called “government profiteering”).
In addition to corruption, power struggles plagued the various factions within the Nationalist government: the Soongs, Chiang, the CC clique, Tai Li, and the Green Gang. Because of the overlapping between the government and its informal ties with the underworld (the Green Gang that also controlled the Chen brothers), much of the struggle was never made public in the Chinese or American newspapers.
Besides political struggles, there was also the struggle over spoils. Sterling Seagrave (The Soong Dynasty (Harper & Row, 1986)) claims that the Soong and Chiang families ate up much of the Lend-Lease goods and money that the U.S. gave to China. T.V. Soong played a suspicious role in overseeing Lend-Lease goods to China, probably pocketing the money meant to buy the goods by himself. By the end of the war, the four wealthiest families in China: the Chiangs, Soongs, Kungs, and Chen (the Chen brothers Lifu and Guofu, heads of Chiang's secret police the CC Clique) were all central figures of the Nationalist Party, probably making their profit mostly through their positions in the government. Their corruption, plus inflation in China: 1939, 83%, 1940, 124%, 1942, 235%, made American money, when exchanged at the official rate of 1:20, almost worthless ($17 million in 1942 to the United China Relief).
Although the Nationalist government temporarily allied with the Communists in 1936 (Chang Hsueh-liang, former general from Manchuria who lost his province to the Japanese in 1931, captured Chiang Kai-shek in 1936 and forced him to ally with the Communists to form a "United Front" against Japanese invasion), Chiang never sincerely wanted to ally with the Communists and to share power. As soon as the war against Japan came to an end, civil war broke out in 1945. The Communists exercised primarily guerrilla warfare to tie down the main forces of the Nationalists, and focused on land reform in the countryside to win over the hearts of the peasants. After much of northwestern China was taken by them, the Communists moved east into the cities and waged several major battles against the Nationalists, finally forcing the latter to back down and flee to Taiwan in several phases between 1948-1950. On Oct.1, 1949, Communist leader Mao Tse-tung pronounced the establishment of the People's Republic of China in Beijing, ending Nationalist rule on mainland China. From then on, Taiwan came to be called the Republic of China.
Although the relationship between the U.S. and Communist China deteriorated in 1950 after the onset of the Korean War, it is interesting that there were moments during WWII when some members of the U.S. government advovated that the U.S. abandon support to Chiang Kai-shek and switch to the Communists. Those who criticized the Chiang Kai-shek regime for its corruption included the so-called “China hands" in the U.S. Foreign Service: John Service, John Davies, and reporter Theodore White. The U.S. general sent to assist Chiang Kai-shek after U.S. declared war on Japan, Joe Stilwell, had a very sore relationship with Chiang. In 1945, the U.S. sent a so called "Dixie Mission" to Yenan, center of Communist occupied areas, to teach them how to use U.S. weapons and consider whether to ally with the Communists. Although KMD corruption had little impact on FDR’s policy toward China because of wartime need, it influenced Truman’s decision not to send Chiang any new support after the war was over. There were, of course, supporters of Chiang's regime in the U.S., one prominent one being Henry Luce, founder of Time and Life.
In the second half of 1945, because of U.S. concern of the possible alliance between the Chinese Communists and the Soviet Union, they decided to support Chiang's regime despite his corruption. The hostile Stillwell was replaced by the Chiang-friendly Wedemeyer. Still, the U.S. wanted to help negotiate between the Communists and the Nationalists. Patrick Hurley, the man chosen to do the job, however, was hostile to the Communists and had no diplomatic experience. He failed to persuade the two sides to avoid a civil war.
After 1949, some members of the U.S.State Department used Truman’s policy to argue that China was “lost” because of failure of U.S. to militarily intervene in the Chinese civil war. One reason Truman did not intervene was because he disliked Chiang Kai-shek personally.