Gloom

China's situation was the darkest in many months. The Government had lost face because its promises had not been fulfilled. When Nationalist armies captured the old Red headquarters town of Yenan last March, Nanking had predicted that remaining Communist armies would be swept from the field in three months. Nanking had made promises about economic recovery too. But last week, just three months after the fall of Yenan, inflation was worse than ever, and the Communists seemed to be winning the war north of the Yellow River.

Midnight Taxes. The Nationalists did hold the major cities and rail lines of North China. But the Communists ruled the countryside. They had the best chance to gather North China's summer crops. The Government could not even protect at night some of the villages it controlled by day. Near Peiping last week, a 70-year-old Chinese farmer complained that the Communists had come by night, three times in the past month, to collect "taxes." Had he reported this? "Heavens, no," said the old man, "the Communists would cut my throat the next night."

This was the theater-by-theater picture:

In Shans? province, walrus-mustached old Governor Yen Hsi-shan (once known as the "Model Governor" because he suppressed the opium traffic) had enough forces to defend his dilapidated capital, Taiyuan. But he could not move against the Communists who now held almost three-fifths of the province. A lot of Communists had filtered into rich south Shansi when the Government withdrew troops for the attack on Yenan. "We traded a fat cow for a skeleton," say bitter men in Taiyuan. Shansi people used to admire

Yen Hsi-shan because he fought his wars in the enemies' provinces. That time has passed. Last week, a TIME correspondent asked Yen what would happen if the Government cannot relieve Taiyuan.

Yen's answer was a masterpiece of Coolidgean understatement: "In that case many people will be poorly dressed." Yen added: "There will be no salt, and that is bad for the bones."

In Shantung, the Nationalists had set out to obliterate large Communist forces. It looked as though the Communists had been driven back into the Shantung hills, but five times this spring the Communists had struck back hard.

In Manchuria, the Government's hold was weaker than at any time in the 19 months since General Tu Yu-ming's troops recovered control from the Japanese. General Tu still held Mukden and Changchun (the capital), but the Communists camped on his line of communication with the south. Manchuria's great seacoast city of Dairen was still in Russian hands. There was little chance that General Tu could take Dairen if Russia did leave. General Tu's men were busy digging trenches and even medieval moats around the cities they still held, not looking for more cities to conquer.

Russian Help? There were explanations for some of this. One was supply. In Manchuria the Government has two crack U.S.-trained-and-equipped armies, the new First and Sixth, veterans of Burma and west Hunan fighting against the Japs. Their present weapons were issued in 1945. Since early 1946 they have received no ammunition stocks from U.S. sources. The very fact that they were trained and equipped in the lavish U.S. supply tradition makes them highly vulnerable to Red attacks on their supply lines.

Many Chinese in Nanking, however, thought there was an even graver reason for the improved military prospects of the Chinese Communists. They were convinced that, almost step by step with U.S. withdrawal of aid, Soviet Russia was expressing her support of the Chinese Reds in more & more tangible ways--specifically, that Russia is sending supplies (still limited) through Outer Mongolia.

Potomac Mandarins. U.S. leftists and liberals like to point to Sun Fo, Vice President of China and son of revered Revolutionist Sun Yatsen, as a model statesman who tolerates Chinese Communism. But last week even Sun Fo was fed up. Said he: "The loss of Manchuria [by] the Government would mean ... a major world problem. Another world war may have already begun, just as when the Japanese began the conquest of Manchuria."

Sun Fo added: "I do not see how the United States could maintain its neutrality or be a bystander. Manchuria would become an appendage of Soviet power, and in five or ten years could be built up as a base from which to conquer the rest of China." What China needed said Dr. Sun, was immediate large-scale aid and military supplies from the U.S.

But Washington, full of gloom about the Chinese situation, was still deadlocked in a bureaucratic row over the loan to China, as it had been for 18 months. One of the conditions asked by those delaying the loan in Washington was that the Nationalist Government clean out Chinese bureaucratic incompetents who could not get things done.

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