Retreat

Not since the worst years of the Japanese war had China faced a prospect so bitter. The Communist autumn offensive had overwhelmed the Nationalists in Manchuria; the vital North China corridor was under heavy attack. For the second time in a generation, a great Nationalist retreat was under way. Isolated outposts would now be evacuated and lines shortened to save men and materiel for a long war of attrition.

One exception to the Nationalist strategy of evacuation was Mukden (see map), site of the best arsenal in all China. Twice in the last fortnight Generalissimo Chiang Kai-shek had flown north to confer with General Wei Li-huang, Mukden's commander, and stir him to a more active defense. As the garrison from starving Changchun hacked southward to join the Mukden forces, Wei's columns drove down to retake the port of Yingkow, reopening Mukden to direct sea supply. More of Wei's troops thrust west to relieve Chinhsien.

Open Door. Wei's force did not make it, and last week Chinhsien fell. It had been a key link in the Nationalist lifeline to Mukden and Changchun. From Chinhsien, supplied by rail from North China and by sea through the port of Hulutao, the Nationalists had flung an airbridge to Mukden. Chinhsien's fall left Mukden dependent for supplies on Yingkow (which freezes over in November), and after that on the long and hazardous airlift from Peiping and Tientsin.

Bad as this was, Chinhsien's fall held a still graver threat: possession of Chinhsien opened to the Communists the northeastern door to North China.

The new danger caught North China's Nationalist commander Fu Tso-yi badly off balance. A fortnight ago Communists had pushed up north of the Great Wall west of Tatung. When Fu's troops dashed westward to drive them back, another Communist force from the north came down in their rear to strike the rail line west of Peiping, threatening to sever it completely and cut Fu's army in two. If the Communists succeeded' in this, Peiping, Tientsin and all North China would be lost.

One-Eyed Dragon. To the south, Communist forces closed in for the kill on rich Taiyuan, capital of Shansi province. Like Mukden ,Taiyuan has an excellent arsenal. During the last Communist attack on Taiyuan some months ago, Nationalist airborne reinforcements came in to save the day. This time it looked as if the outnumbered 40,000-man garrison would have to fight it out alone.

East of Taiyuan, General Chen Yi, conqueror of Tsinan, finished mopping up Shantung province and formed for a southward drive on Suchow, main Nationalist stronghold across Shantung's southern border.

South of General Chen, the Communist offensive was in the hands of shrewd, slippery General Liu Po-cheng, "the one-eyed dragon." Maneuvering down the rail line toward Hankow, Liu sent one column from his major force hell-for-leather down around Sinyang to feel out the railway defenses along the line south of the city. If Liu could cut the rail line, he would have Sinyang encircled and more than 100,000 Nationalist troops in the trap. Besides, by cutting the line he could link with other Communist forces to the south and threaten the Yangtze Valley from Hankow to Ichang.

Economic Front. While its defending armies braced themselves for General Liu's attack, Hankow, like Tientsin, Shanghai, and all the other commercial cities of China, faced the more immediate threat of a collapsing economic front.

One day last week some teams of sweating barefoot coolies were loading small shallow-draft river steamers along Hankow's waterfront. An order came to go into reverse and unload the goods already aboard the ships. Hankow's export embargo order was a desperate effort to save the city's dwindling stocks.

Hankow was under an economic siege which the Communists had not laid down directly, but for which they were indirectly responsible and from which they benefited. Restrictions, inflation, and the general drying up of trade had flattened what was once proudly known as "the Chicago of China."

"No Other Way." To add to Hankow's troubles, the new gold yuan (TIME, Aug. 30), heralded as the savior of China's economy, hit the skids. On the dollar black market the rate jumped from the official four yuan to a dollar up to 15 to one. Farmers would not accept paper currency at all--they demanded silver coin for their produce. Merchants began bidding against one another on the black market for silver cartwheels. When asked about his illegal operations, one laopan (storekeeper) replied: "'Mei-yu fa-tze, mei-yu pieh-ti fa-tze" (No way, no other way).

The laopan was bitter against his government. Was he fearful of Communists? He shrugged his thin shoulders. "We merchants want peace and stability. We have almost come to the point where we do not much care who gives it to us."

Although Liu Po-cheng's Red armies were still 175 miles away, the slow throttling of the economy was already achieving Communist ends in Hankow--and all across the face of Nationalist China.

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