After Chiang Kai-shek, He Yingqin, and others annihilated thousands of troops from the New Fourth Army in southern Anhui on January 13, and the Military Commission of the Chongqing National Government issued a counterrevolutionary order declaring the New Fourth Army rebellious, revoking its designation, and putting Ye Ting on trial, the political situation in China has been greatly affected. A summary of the situation from various sources is as follows:

(1) The Central Committee of the Kuomintang in Chongqing: They are vigorously mobilizing anti-communist public opinion, forcing newspapers nationwide to publish news and editorials slandering the New Fourth Army, and propagating to both domestic and foreign audiences that this is merely a matter of military discipline, not a political issue; a local problem, not a national one; and an internal affair, not a diplomatic matter. Chiang Kai-shek’s statement on January 27 similarly attempts to downplay the significance of the incident by framing it as an enforcement of military discipline, aiming to numb both domestic and international observers. In areas under Kuomintang control, they are arresting large numbers of Communist Party members and progressives, engaging in conspiratorial persecution, orchestrating surrender campaigns, and surveilling and detaining personnel from liaison offices. Militarily, they are concentrating 200,000 troops under Tang Enbo and Li Pinxian to attack the New Fourth Army in central China, secretly ordering that the Eighth Route Army in central China be treated as the New Fourth Army for attack purposes, and intensifying the construction of blockade lines near the Shaanxi-Gansu-Ningxia Border Region while launching localized offensives. All these actions are aimed at subduing us through pressure. However, there are internal disagreements within the Kuomintang. He Yingqin and Bai Chongxi advocate for a decisive strike; they sent telegrams to frontline commanders soliciting their stance on the Communist issue. Chen Cheng’s telegram advocates for a full-scale offensive. It is rumored that He and Bai ordered Fu Zuoyi to prepare military operations against the Eighth Route Army. He Jian and Chen Jitang advocate for executing Ye Ting. Feng Yuxiang harshly criticized He Yingqin, calling him a conspirator, though he did not directly target Chiang Kai-shek. Sun Ke expressed concern, while Yu Youren indignantly claimed that He had deceived him. Zhang Chong (a member of the Kuomintang Central Committee who negotiates with us) expressed helplessness, saying he had no face to meet anyone. Some Kuomintang members worry about a split, with veteran members even saying that such actions could lead to self-destruction. Many within the Kuomintang are also anxious and indignant, believing the matter has been handled excessively, and some express panic.

(2) Minor parties and centrist factions: They are greatly disappointed with the Kuomintang and deeply feel the necessity of uniting for democracy and against civil war. Figures like Zhang Bojun of the Third Party and Zuo Shunsheng of the Youth Party plan to initiate a democratic unity movement, seeking active cooperation with the Communist Party to resist Kuomintang oppression. Madam Sun Yat-sen, He Xiangning, Liu Yazi, and other Kuomintang Central Committee members and prominent figures jointly wrote to Chiang Kai-shek, pointing out the pro-Japanese faction’s conspiracy led by He Yingqin and earnestly hoping Chiang would not be misled by treacherous individuals, urging him to pull back from the brink and fully implement the Three Principles of the People and the Three Major Policies of the Premier. Many representatives of the national bourgeoisie, such as Huang Yanpei, express sympathy for the beleaguered New Fourth Army while also expressing disappointment in the prospects of the War of Resistance. Huang Yanpei plans to meet Chiang Kai-shek to present three points: (a) hope Chiang will stop before going too far; (b) while military discipline is important, attention must also be paid to winning the people’s hearts; (c) urge Chiang to look outward. He has told others that regardless of the rights and wrongs of the incident, the authorities’ handling of it is absolutely wrong, and he hopes to minimize the issue and resolve it peacefully. Among centrist forces, some hope the Communist Party will adopt a firm stance, while others express pessimism and wavering. Most miscellaneous troops and local powerholders feel that the dissolution of the New Fourth Army is a precursor to the dissolution of local forces, saying, "Using miscellaneous troops to eliminate miscellaneous troops, the central government will not allow miscellaneous troops to exist." Thus, they show panic and sympathy toward us.

(3) Financial circles: Since the incident, various commodity prices have risen further, foreign exchange rates have fallen, banks have suspended trading, HSBC has stopped quoting rates, and bankers like Chen Guangfu have halted investments in the interior.

(4) The general populace and progressive forces: They express resentment toward the Kuomintang and sympathy for the Communist Party, believing that the Kuomintang’s undermining of unity and resistance will lead to national ruin through civil war. Upon hearing the news, many young students, workers, and staff members have shed tears, felt anguish, or expressed anger, and progressive elements in many schools have fled.

(5) The Communist Party’s overall stance: As reflected in the order and statement issued by the Central Military Commission of the Communist Party of China on January 20, which includes twelve demands, the entire party unanimously supports it with heightened morale. Non-party figures, such as Feng Yuxiang, say that only the Communist Party’s twelve demands can resolve national affairs. Political councilors like Zhang Yilin were extremely pleased upon reading them. Centrist figures who previously feared that the Communist Party’s excessive firmness might cause a split now support our party’s tough stance. Chiang Kai-shek, He Yingqin, and Bai Chongxi originally estimated that we could be intimidated, thinking that since the Soviet Union did not want a rupture, the Communist Party would certainly not dare to be tough. Seeing our current stance, they are caught off guard and show panic. Chiang has repeatedly sent his representatives Zhang Chong and Zhang Zhizhong to negotiate solutions with Zhou Enlai and has dispatched Ye Jianying back to Yan’an.

(6) British and American perspectives: Except for a few (such as the U.S. ambassador, his naval attaché, and a secretary, all of whom heed He Yingqin’s words, claiming the New Fourth Army’s resistance against Japan is not genuine) and some reactionary journalists who view this as a local internal Chinese issue unrelated to Britain and the U.S., most foreigners believe this matter directly affects China’s resistance prospects and British and American interests. They have issued statements and telegrams urging British and American authorities to pressure the Chinese government to prevent the incident from escalating. A certain American journalist in Hong Kong reported that the New Fourth Army did not disobey orders, and after discussions with key figures in Chongqing, they deeply felt the severity of China’s situation, hoping Britain and the U.S. would take note. Once all Communist forces move to Hebei, Kuomintang troops will likely establish buffer zones with the Japanese army, facilitating Japan’s southward advance, and they hope Britain and the U.S. will pay attention. A foreigner in Chongqing said that even foreign church ladies are indignant, stating that regardless of the reasons, the New Fourth Army is fighting the Japanese. An editorial in Hong Kong’s English-language South China Morning Post pointed out:

a. The area evacuated by the New Fourth Army is reportedly now occupied by Wang Jingwei’s forces.
b. The Communist Party’s strength is widely recognized as an indispensable part of China’s overall resistance effort.
c. From any perspective, the Communist Party’s basic demands, hopes, and foresight for China are far superior to those of feudal national leaders.
d. The Kuomintang must still rectify its internal discipline.

The British ambassador met with Chiang Kai-shek to advise halting internal conflicts. It is reported that Britain and the U.S. have indicated to the Kuomintang that while the Communist Party opposes capitalism, for the sake of the overall situation in China, the central government (Kuomintang) should not handle the issue too hastily to avoid forcing an incident. The visit of Lauchlin Currie from the U.S. to China is reportedly related to investigating the New Fourth Army issue. U.S. loans and Sino-Indian air traffic are said to have been obstructed due to the New Fourth Army incident. A German news agency reported that the New Fourth Army is the best anti-Japanese force, and when they were attacked by a large army while following orders to relocate, it might be connected to Britain and the U.S. Currently, internal contradictions in China are sharp, and the future may see cooperation between Chiang Kai-shek and Wang Jingwei. They estimate that if Germany and the U.S. go to war, Japan will withdraw from its alliance, and at that point, Japan and the U.S. will jointly sacrifice China. Koreans, upon hearing of Ye Ting’s capture, are deeply aggrieved, saying that once civil war breaks out in China, their hopes for liberation will be dashed.

(7) The Japanese aggressors: They are elated. A celebration rally was held in Nanjing, where Wang Jingwei gave a speech, saying that in recent years, Chiang Kai-shek has done nothing good, except for this one thing, which was done quite well. Taking advantage of Chongqing’s focus on anti-communist efforts, especially after the order was issued on January 17, Japan began mobilizing seven divisions on January 18 and launched a large-scale offensive into Henan on January 24. Now, the national army is hastily responding, and many commanders feel they have been greatly deceived by the pro-Japanese faction led by He Yingqin.

(8) Comprehensive assessment: As of today, due to Chiang Kai-shek’s grave mistakes, our justified and firm stance, Japan’s offensive into Henan, diplomatic pressure from Britain, the U.S., and the Soviet Union, internal contradictions within the Kuomintang, sympathy from centrist factions, and the widespread public indignation against Chiang, a foundation for compromise has begun to emerge. Civil war can be avoided, and there are signs that China’s situation is shifting in a direction favorable to us.