U.S. Intelligence and the China Hands: Cold War Failures

Introduction: The 'Loss' of China and Its Intelligence Roots

The "loss" of China to communism in 1949 dealt a serious blow to United States foreign policy, yet this was not an inevitable outcome of the Chinese Civil War. In fact, the so-called China Hands had been on relatively good terms with Mao Zedong and the Communist leadership, and the Communist success in the war could actually have been a boon for the United States' position on the world stage — specifically by offering something of a bulwark against Soviet expansion in the form of a "friendly" communist superpower. However, this would never come to pass. Intelligence failures on the part of the Office of Strategic Services, the China Hands' (and their British counterparts') inaccuracy in predicting the speed of Mao Zedong's success, and an intense domestic fear of communism on the part of officials and the public alike all meant that the China Hands' otherwise accurate reports were greeted with distrust, suspicion, and eventually outright hostility. This domestic reaction to communism's rise in China meant that what might previously have been an intelligence blunder became a full-blown disaster: by missing its initial chance to establish a healthy relationship with Communist China, the United States ensured that there would be little to no contact between the two countries for over two decades.

Before examining the experience of the China Hands and the intelligence failures and public reactions that led to their dismissal, it is necessary to provide some historical context — not only regarding the Chinese Civil War, but also the state of international diplomacy in the first half of the twentieth century. The China Hands were first and foremost diplomats, even if their jobs required many of the same skills as straightforward intelligence agents. Diplomacy and intelligence operations have likely been linked ever since both practices first began, but the experience of the China Hands during the Chinese Civil War is especially interesting because the United States' intelligence apparatus was undergoing an important transition: the country's World War II intelligence organization, the Office of Strategic Services (OSS), had not yet transformed into the Central Intelligence Agency (CIA), and the OSS' experience in China had largely been one of frustration and impotence.

Somewhat paradoxically, then, the first step to understanding the experience of the China Hands is an examination of the OSS' activities in China, because this contrast illuminates the different methods and goals of military and diplomatic intelligence officers, and how that contrast contributed to the intelligence failures of the post-war years. Following World War II, the China Hands essentially became responsible for all intelligence regarding China, even as their position as diplomatic officers made military and congressional leaders resistant to their recommendations. This is because the OSS' efforts at intelligence operations in the country were, in some respects, a spectacular failure — leaving the United States' only useful agents in China in the form of diplomats and Foreign Service Officers.

First created in 1942, the OSS' actions in China revolved almost entirely around military considerations, naturally focusing on the Japanese occupation, as this had the most direct bearing on the United States' role in World War II. The OSS' operations in China demonstrated a high degree of infighting and incoherence among American military and intelligence leadership, because even at the dawn of the organization's formation it was clear that whoever controlled the OSS would likely control the United States' entire intelligence apparatus going forward.

The OSS in Wartime China: Infighting and Failure

As a result, OSS intelligence operations in China during World War II were not necessarily conducted with an eye toward the specific culture and objective at hand. Instead, they represented a kind of trial run, with leadership effectively using occupied China as a testing ground for a new organization. The OSS took its cue from British intelligence efforts in China and opted to use Korean nationals as surrogates, under the belief that: "The distribution of the Koreans in important centers opens the way for their employment in intelligence and sabotage work against the Japanese. This is not the case with other nationals, particularly whites and Chinese, who are readily identified in the Japanese domain."

Unfortunately, as this method was "a direct, dogmatic, and most awkward adaptation of the British method," it immediately created Chinese opposition at the highest levels, such that the United States' nominal allies against the Japanese had little interest in cooperating with an agency that "gave off a strong odor of British colonialism." Furthermore, Major General Tai Li of the Chinese Army, who headed the secret police and guerrilla forces, had already backed a faction of Korean nationals who were in direct opposition to those favored by the OSS as surrogates, all but ensuring that the OSS' intelligence operations would meet with failure.

Finally, it should be noted that the OSS concerned itself primarily with the National Government of China and had little interaction with Mao Zedong or his forces. The OSS mission is thus a case of backing the wrong horse twice: first, the OSS essentially supported the wrong group of Korean nationals, and more broadly, it backed the Nationalist government at the expense of developing more fruitful ties with the Communists. Though the Communist faction and the National Government were nominally aligned following the Japanese occupation of China, the two groups operated relatively independently, and the "cooling" of their civil war during World War II represented an intermission rather than an end. This fact seems to have been lost on the leadership of the OSS, if only because their focus was entirely on China's potential use as an avenue of attack against Japan, rather than as the site of a critical political and military conflict in its own right.

In contrast to the OSS' naive entry into occupied China, the diplomatic wing of the United States — in the form of the China Hands — had been operating in the country since at least the 1920s as Foreign Service Officers of the Department of State. Furthermore, even beyond these official representatives, U.S. nationals had long been in contact with Mao Zedong. Agnes Smedley, a writer and journalist, had actually "spent seven months in Yenan, Mao Tse-tung's Red Army headquarters, where she taught Mao and Chou En-lai to dance."

Smedley was one of a handful of American journalists living in China throughout the 1920s and 1930s, and the relative ease with which they were able to access important Chinese leaders helps demonstrate just how myopic the OSS' entry into the country really was. The OSS' intelligence efforts in China, like many intelligence and military blunders throughout history, resulted from a small group of self-confident individuals believing they could simply apply preexisting techniques to a novel situation — all without consulting those who might have offered relevant cultural, historical, and political insights.

Recognizing the presence of American journalists in China, and particularly in Yenan, is crucial to understanding the efforts of the China Hands following World War II, because it allows one to better contextualize the so-called Dixie Mission — "the American observer/liaison group with the Chinese Communists based in Yenan from July 1944 to March 1947." The Dixie Mission was made up of members of the State Department and the United States Army, and they were sent to China to study and liaise with the Communists because, following the general failure of the OSS' efforts, the American military rightly believed that the Communist faction was better led and organized than its Nationalist counterpart. One may view the work of the China Hands as an extension of the same military interest that motivated the OSS' efforts, but with an important distinction: the Dixie Mission was staffed by individuals with prior experience in China, experience that allowed them to view their efforts in a broader context than even their superiors imagined.

The China Hands and the Dixie Mission

This distinction matters because, although the Dixie Mission began as part of the United States' efforts in World War II, after a year the war with Japan was over, and the mission's goals transitioned rapidly. The members of the Dixie Mission recognized the complex geopolitical reality at hand, and from nearly the outset reported back that the Chinese Communists would prove a useful ally — not only during World War II, but afterward. It was the near-unanimous belief of the Dixie Mission that the Chinese Communists would eventually gain control of China, and that it was in the United States' best interest to support them over the corrupt and disorganized Nationalist regime. Even after the Dixie Mission's departure in 1947, President Truman's own special fact-finder, A. L. Wedemeyer, publicly condemned the Nationalist government.

Following the end of World War II, the Chinese Civil War resumed almost immediately, though there was a brief period of nominal ceasefire. Special envoy George Marshall organized a ceasefire between the Nationalists and the Communists in 1946, but it did not last long. After World War II, Communist power was centered in the northeast of the country — an area secured by Soviet forces — and Stalin's attempts to protect Soviet interests ultimately doomed the fragile ceasefire Marshall had arranged.

Stalin withdrew his troops from northeast China, but did so in a way designed to ensure that they left "the CCP [Chinese Communist Party] in control of as much of Manchuria as they could grab by their own force." The withdrawal was intended to help the Communists control areas vacated by the Japanese, who had previously dominated vast portions of Manchuria. Stalin's broader aims were to force "the GMD [Guomindang, or Chinese Nationalist Party] to make economic concessions, to prevent a united China from allying with the United States, and to placate Washington on the international arena by giving in to American demands for withdrawal." In actuality, however, he not only laid the groundwork for the Communists' eventual victory but also opened a window for the possibility of a U.S.-Communist alliance that would have destabilized Soviet power. As will be seen, the United States failed to capitalize on this opportunity — and Stalin's withdrawal ultimately appears to have backfired.

Stalin's withdrawal was not directly aimed at ensuring a Communist victory; rather, it was an attempt to destabilize China and deter American interests. At times Stalin actually seemed to favor the Nationalist government, which had developed relatively close diplomatic ties with Moscow, to the point that Stalin "much preferred negotiating with [the Nationalist government] than with Mao, whom he considered an opinionated upstart." As a result, "Mao regarded Stalin's policies towards China as being deliberately devious," and "he had strong grounds for thinking so," because prior to the withdrawal Stalin had repeatedly stifled the Chinese Communists' attempts to take ground in an effort to keep China divided and thus less threatening.

Mao was well aware that Soviet actions regarding China were entirely self-interested, just as the United States' tepid support of the Nationalists had been driven by its own wartime agenda. Following the Soviet withdrawal, Mao made no attempt to conform to Stalin's wishes. The rift between the Soviets and the Chinese Communists was so deep that throughout the rest of the Civil War, Stalin repeatedly urged Mao to form a coalition government rather than seek complete control of China — and each time, Mao confidently rebuffed him.

Conclusion: A Recurring Pattern in American Intelligence

The experience of the China Hands reveals a recurring problem with intelligence gathering and dissemination that has plagued the United States to this day: the best intelligence frequently cannot overcome political or ideological reservations, and furthermore, the inability to overcome those reservations often results in intelligence becoming tainted by bias. The reaction of American anti-communists to the Communist victory in the Chinese Civil War served as a kind of self-perpetuating ideology. The China Hands were blamed for the Communist victory rather than credited with predicting it, because from the beginning the anti-communist position was that Mao Zedong should not be allowed to succeed and that the United States was capable of preventing this outcome. When the Communists did succeed, the blame was laid not at the feet of the anti-communist elements in government and the military that had supported the Nationalist regime, but rather at those of the China Hands, whose "bad" intelligence had supposedly prevented the United States from effecting a Nationalist victory. In turn, the entire system that had produced this "bad" intelligence had to be replaced with "good" intelligence provided by an organization that conveniently agreed with the anti-communist position.