The Underground War for Shanghai

During the night of November 21–22, 1928 a steamer moored at the docks in the Chinese section of Shanghai, and a group of harbor coolies, flanked by a squad of thirty armed guards, began to unload chests onto the dock. Alerted by a tip some weeks before that the chests would contain a large consignment of opium, the civilian police agents of the Shanghai Public Security Bureau were already concealed among the warehouses nearby. At the blast of a whistle, the police agents ran forward, shouting out their identity as police officers and warning the opium smugglers to surrender.

To their astonishment, instead of surrendering, the thirty guards escorting the opium coolies produced papers proving that they themselves were the agents of the Shanghai region’s Military Garrison Command, and that the opium shipment had been consigned to their garrison commander. The military guards thereupon arrested the civilian police officers for interrupting them while they were performing their duties, and had them held at a nearby military station. The chests of opium were carried into the neighboring French Concession, where they were stored in safe houses until they could be sold.

The incident in which the lines between police and criminals blur and overlap is but one of many such discussed by Frederic Wakeman in his absorbing new study of Shanghai. Cumulatively, he writes, they point the way to a central crisis in the history of the Nationalist Party under Chiang Kai-shek’s leadership: the development of “stupendous government criminalization” that was a major factor in the “delegitimation” of Chiang’s regime, with all the fateful consequences that this entailed for the Chinese people.

By concentrating on the “policing” of Shanghai, Frederic Wakeman has added a major new element to the rich variety of books on Shanghai that in the last few years have included significant studies of the city’s universities and students, municipal institutions, foreign settlements, ethnic groups, labor movements, and wartime collaborationist intellectuals.¹ Drawing on a vast range of printed and archival sources—perhaps most importantly on the files of the Shanghai foreign settlements’ municipal police, which were fortunately saved and preserved in the National Archives in Washington—Wakeman gives a convincing picture of the nightmarish problem of controlling Shanghai in the Twenties and Thirties, when it was in its heyday as an international city of sin.

The fundamental problem for law enforcement officers and politicians alike was that the city of Shanghai was a jurisdictional tangle of the utmost complexity. The two main foreign “concession” or “settlement” areas, one dominated by the British but known as the “International Settlement,” the other as the “French Concession,” both bordered on the original Chinese city of Shanghai, which they almost completely surrounded. For close to a millennium, Shanghai had been a prosperous walled trading emporium that had made good money for its residents by its proximity to the active trade life of the Yangzi delta region and the inland trade along the river.² But in the treaties forced on China by the British at Nanjing in 1842 at the conclusion of the first Opium War, and later extended to and ratified by other foreign powers, including the French and the Americans, Shanghai was named one of the new “Treaty Ports.”

In such specially designated ports, foreign merchants and missionaries could live and work in zones controlled by their own armies, navies, and security forces, and subject to control of their own indigenous legal systems rather than by Chinese law. Under the threat of two separate attacks by the massed forces of the Taiping rebels—one in the early 1850s and one in the 1860s—the foreign powers had greatly strengthened the defenses of their own concession areas, and clarified what they considered to be their legal and fiscal rights.

After the defeat of the Taiping rebels in 1864, the foreign concession zones grew rapidly in prosperity, extent, and population. As land was drained, the famous riverside district called the “Bund” was developed as a major financial and harbor district, and new systems of roads were built far out into the suburban countryside, along with large new houses and estates. Joining in the general prosperity and expansion, Chinese traders and settlers also flocked to the greater Shanghai area, forming dense settlements and businesses in the region of Pudong, across the river from the Bund, and in the formerly open farm land to the north of the British concession, and to the south of the French. The addition of a railway system with two stations, one north and one south, the construction of tramways, and the coming of the automobile, all contributed further to the city’s expansion in the early decades of the twentieth century.

The population of the city tripled between 1910 and 1930, Wakeman tells us; by the later date, the registered inhabitants of the city—Chinese and foreign—numbered just under three million. Of these, 1.5 million Chinese and close to 10,000 foreigners lived in the parts of the city under Chinese jurisdiction; almost half a million Chinese and 12,000 foreigners lived in the French Concession; and just under a million Chinese and 36,000 foreigners lived in the International Settlement. Since the foreigners were in charge of policing and administering their own districts, this meant that approximately 1.5 million Chinese living in the foreign zones were subject to foreign rather than to Chinese jurisdiction.

By the 1920s, this strange situation had made Shanghai a paradise for Chinese criminal organizations and protection rackets. As a few others have done before him, but now in far greater detail, Frederic Wakeman traces many of these criminal groups, especially the notorious “Green Gang,” back to the secret organizations that had emerged among the barge-pullers and coolie laborers along the Grand Canal and other waterways in the closing years of the Qing dynasty (which fell in 1912). He shows clearly how these groups coalesced into an organized system of racketeers, and how their leaders solidified their hold over opium distribution and sales, over prostitution, and over a vast system of gambling enterprises that included horse racing, greyhound tracks, and local lotteries. He shows further how it was that in their efforts to limit crime to manageable proportions within their own concession, the French police and consular authorities made successive deals during the 1920s, first with the racketeer Huang Jinrong, whom they named as chief of the Chinese detectives in the French Concession, and with Huang’s immensely powerful fellow racketeer and Green Gang leader Du Yuesheng.³

Between them, Huang and Du made it their job, through extortion, terror, and murder, to keep all criminals not affiliated with their own organizations out of the French Concession. Though not so dramatically obvious, similar arrangements prevailed in the British-dominated International Settlement, where the Special Municipal Police relied heavily on Chinese informants and enforcers to keep crime within acceptable limits. The scale of criminal operations in the two international concessions and the Chinese city was colossal. Wakeman estimates that in the mid-1920s the narcotics trade in opium, morphine, and heroin was already worth $6 million per month in payoffs to the authorities who ran the city, regardless of whatever much greater sums went to the syndicates. Gambling brought in at least $1 million a week. And though there are no figures on the revenues from controlling prostitution, the number of prostitutes in the city—Chinese in the main, but also Americans, White Russians, and other foreigners in considerable numbers—was estimated at 70,000 in 1920, and 100,000 by the 1930s, suggesting at least the scale of income available.

The arrival in Shanghai in 1927 of the Nationalist Chinese Kuomintang armies—which had set out on their “northern expedition” from Canton under Chiang Kai-shek’s leadership—brought a new element into this already tangled situation. Chiang Kaishek’s decision to abandon the United Front policy of his political mentor Sun Yat-sen meant that the Nationalists now swung decisively against the Communists and became determined to smash the extensive Communist organization that dominated many of the Shanghai labor unions.

In this venture, the racketeers in the foreign concessions—like Green Gang leader Du Yuesheng—were vital potential allies. They knew the city intimately, including its elite, working class, and criminals. Green Gang members often acted as labor bosses, recruiters, and plant managers in Shanghai, and their webs of members and informants could instantly pinpoint labor leaders and Communist agents, their bases, and their safe houses. Through their social contacts in the concessions—Du Yuesheng for instance had a mansion on the rue Wagner in the French Concession—they also moved on terms of easy familiarity with the foreigners who officially governed the settlements. Thus it was logical for Chiang Kai-shek to use the Green Gang to help him break the workers’ power in 1927. To do so he first got permission from the leaders in the foreign enclaves to move Green Gang armed paramilitary groups unimpeded through the settlements so they could attack the Communist and labor bases at will.

Chiang’s army encountered no serious military opposition after it entered the city and carried out what amounted to a coup. Chiang then determined to maintain strong control over the Chinese sections of the city, and to work methodically to whittle away at legal and financial privileges for the foreign dominated districts and ultimately to end their special status. To help him achieve these goals, he formed a new Special Municipal Government to manage the Chinese districts of the city, and recruited many new police to the force there, assembling them into a newly organized Public Security Bureau. As Wakeman skillfully shows, this was in many ways a worthy attempt but it foundered for a number of reasons. The Public Security Bureau police had what turned out to be somewhat contradictory goals: on the one hand, “law enforcement” in the precise sense of controlling crime and, on the other, “maintenance of order” in a broader sense of carrying out the Nationalist Party’s conservative and moralistic program of social reform.

The bureau attempted to incorporate the best of both the Japanese system, in which police were installed in shelters or “boxes” at regular intervals on the streets, and the American system of the “cop on the beat.” (August Vollmer, the Berkeley town marshal who rose to become head of the International Association of Chiefs of Police, and the first Professor of Criminology at the University of California, was taken as a model by Chinese police at this time.) Police procedures were standardized, as were weapons and salaries, and uniforms became smarter; finger-printing techniques were refined, and effective phone and radio communications set up. This heightened professionalism was tied to the enormous demands placed on the individual officers. As Wakeman explains their duties in late 1927 and 1928:

Although certain aspects of the administrative organization of the PSB [Public Security Bureau] resembled traditional Chinese bureaucracy, the chain of command was theoretically modeled on modern rational procedures and rules. The inclusiveness of the PSB, however, mitigated against a strictly functional division of labor. In addition to supervising the police department’s internal affairs, the new PSB Inspectorate was also supposed to collect patriotic contributions, maintain connections with “mass movements,” lead anti-smoking campaigns, regulate price controls over goods like kerosene, oversee the distribution of rations, provide postal inspectors, recruit new policemen, and supervise public health work….

Military forms of command called for army-like discipline. Policemen not only were supposed to look and act like well-trained soldiers; they were also expected to relinquish their personal liberty to brigades that controlled their physical presence during duty hours. Police regulations stipulated that patrolmen were not allowed to abandon their official posts for more than two nights a week, when they could sleep out of their regular police dormitories and take furlough to attend to their personal affairs at home. And policemen who slipped away from the canteen, where they were supposed to consume official rations prepared by PSB cooks, to eat at home with their families and friends, were also strictly reprimanded and punished.

As if this were not enough, the Chinese police of the Public Security Bureau were also ordered to take on the concession police of the settlements, especially by constantly patrolling the “outer roads” along which the foreigners’ own Shanghai Municipal Police units had asserted de facto control in the pre-1927 period, and to carry out a crackdown on all traffic violations by foreign concession residents when they ventured out into Chinese districts. Chiang also attempted to weaken the jurisdiction of the so-called “Mixed Court System” under whose aegis trials of Chinese in the concessions were conducted, and to force Chinese residents of the foreign concessions to pay some form of tax to the Chinese authorities.

Along with their immensely difficult series of tasks, the Public Security Bureau also tried to maintain order through enforcing public morality. In 1927 it had been granted extraordinary powers under martial law to interrogate and even execute criminals and subversives. Now its officers were also given the power to conduct instant trials in the streets, and to impose fines, prison terms, or enforced residence in reformatories on Chinese who behaved improperly in dance halls, disturbed public order, organized student or labor protests, or even engaged in swearing or spitting. They clamped down on gambling and narcotics distribution in Chinese neighborhoods under their jurisdiction. With the support of the Nationalist political authorities, they attempted to end gambling in the foreign concessions, and to whittle away at the powers of the major narcotics dealers in the same areas.

The Public Security Bureau’s vigilance in controlling narcotics led to the confrontation discussed at the opening of this review. It occurred because the Public Security Bureau civilian police had been forced to undergo a bewildering change of mission with regard to the control of opium. Initially, the Bureau’s authorities were under instructions to enforce a new system of legalized opium distribution introduced in Shanghai in August 1927 by the new Nationalist government based in Nanjing. The aim was to force all opium addicts to register with the government, and allow them to receive limited amounts of drugs purchased from special government distribution centers until such time as they could be enrolled in government-sponsored hospitals and detoxification centers. However sincere some officers of the Public Security Bureau may have been about carrying out this program, the Nanjing government and its military arm—as represented by the Garrison Command—were bound to be ambiguous about it. For as Wakeman notes, the income accruing to Chiang’s government in the first year of the program totaled some $40 million from registration fees paid by the “official” opium distribution centers and the permits and drugs bought by the registered addicts.

By July 1928, however, the legalization campaign had aroused such strong opposition that Chiang Kaishek announced his government would no longer draw income from drug sales and registration. He formed a new “Opium Suppression Committee” that would try to end all sales. The result was not suppression but the increased sale of narcotics, often under military protection, and the continued power of racketeers like Du Yuesheng who, largely owing to his crucial aid to Chiang Kai-shek during 1927, had been able to gain respectability as a public figure, philanthropist, and banker. In the case of the briefly interrupted November 1928 shipment, it later turned out that the tip alerting the Public Security Bureau to the arrival of the narcotics had been sent by the powerful military commander Feng Yuxiang. He himself accumulated huge stocks of opium in the northwestern provinces of Shaanxi and Gansu, and was trying to drive other stocks off the market and jack up prices before sending his own opium down to Shanghai.

Du Yuesheng’s power over the drug distribution networks did not end even when the French, under political pressure from Paris, finally in 1932 ousted him from his power base in their concession. As the price of his departure Du was able to persuade the French to intercede on his behalf with the authorities in the Chinese city, where he was soon as powerful as he had ever been, but protected now by the very Public Security Bureau that for a time, at least, had seemed able to check his empire. By 1934 the newly respectable Du, his rackets unimpaired and even protected, had also been named deputy director of the Chinese Red Cross, a member of the elite Municipal Council that acted as an advisory group to the Chinese city’s government, chairman of the board of the China Trading Bank, and director of the Shanghai Opium Suppression Bureau. This bureau had once again, after a second change in Nationalist policy, been given the task of ending addiction through registration, controlled sales, and detoxification. As Wakeman wryly comments, “Implausible as it seems at first glance, Shanghai’s biggest narcotics dealer was at the same time the city’s major civilian drug enforcement agent.”

Inseparably linked to this remarkable story was a parallel one, explored with equal thoroughness by Wakeman, the story of the Nationalist government’s attempts to destroy the power of the Chinese Communist Party once and for all. Again, the Public Security Bureau, as Shanghai’s premier police agency, was called upon, this time to do things that took it even further away from conventional law enforcement. For in hunting down Communists and their supporters—who included not only radical workers, but also many students and citizens angered by what they saw as Chiang Kai-shek’s insistence on appeasing the Japanese—the Public Security Bureau was forced into two new alliances: with the foreign concession police forces on the one hand and on the other with the new special forces and security apparatus created by Chiang Kai-shek and his close associate Dai Li under the euphemistic name “Military Statistics Bureau.”

The French at this time were alarmed by the presence of leftist radicals linked to Indochinese rebel groups; the British were concerned by the activities of Indian nationalist parties. The police of both foreign concessions there moved steadily toward cooperation with the Nationalist government police and secret service forces. Starting with the simple permission to move Nationalist-affiliated gangster squads through their concessions in 1927, they went on to pool information on radicals who disembarked in Shanghai. They then allowed Public Security Bureau agents and Dai Li’s forces to infiltrate the concession zones to spy on radical activities. By 1931 they were openly “extraditing” radicals from the concession zones and turning them over to the Nationalists to be tortured or put to death at the Chinese government’s whim.

In that same year, three remarkable pieces of counterespionage by the Nationalists seriously damaged the prospects of the Communist Party in China. One was the breakup and arrest by the Nationalist Security agents of the key members of the Cominternrun spy ring within the Nationalist government. The second was the dismantling of the Chinese Communists’ key organization of terror and assassination, the “Red Brigade.” And the third was the discovery of a “mole” at the very center of the Chinese Special Services Bureau.

Wakeman’s accounts of Communist espionage and the Nationalist responses to it provide perhaps the most fascinating pages of his book. Though the outlines of the spy ring case have long been fairly well known, those of the Red Brigade and the mole were new to me. Drawing on a wide range of recently published Chinese reminiscences, as well as on both French and Chinese archives, Wakeman reconstructs how after the initial Communist defeats of 1927, the Red Brigade was set up on orders of Zhou En-lai in 1928 to provide intelligence, weapons, and safe houses for Communists in hiding and to eliminate internal Party opposition through intimidation or murder. It also established legitimate business fronts—furniture stores, real estate agencies, rice shops—where Communists could take paying jobs as they pursued their political work. Under the leadership of an alternate-member of the Politburo named Gu Shunzhang, a machinist and former Green Gang member who had taken a secret GPU training course in Vladivostok in 1926, the Red Brigade developed its own formidable organization.

Using the memoirs of one of the key leaders of Chiang Kai-shek’s counter-intelligence forces, Wakeman shows how the Red Brigade also established safe houses and “secret command posts” (bimi zhihuisuo) with extremely tight security. Party leaders would order a Red Brigade cadre to send agent A to set up the safe house. A would in turn send agent B, who worked undercover in a CCP real estate agency, to lease the dwelling. Another agent, C, would be sent by A to rent furniture. Neither B nor C would know each other, and if their paths accidentally crossed they usually assumed the other to be a bona fide businessman. Meanwhile, another Red Brigade group, in touch with only one agent above (B and C only needed to know a single CCP member, agent A), would put together a team of servants, a cook, relatives (including children and grandparents) to make up a household of eight. Some of these were Party members; some might also be dependents of Party martyrs. Once mobilized, the ordinary-looking family would move into the residence and set up house. Ever alert and vigilant, the people running such a CCP safe house could have it vacated, along with all documents, within two hours of receiving notification from a Party informant in the police or investigative services of an impending raid. Within four hours the house could be entirely stripped of furniture and personal belongings. By the time the police arrived they would find only an empty house.

Gu Shunzhang also organized the placement of Communist Party members in the lower echelons of the Nationalists’ counter-intelligence and police systems, where they would work quietly and rise slowly in the ranks till they became trusted and privy to crucial information. By 1930 the Chinese Communist Party had moles securely placed in the Nationalists’ Central Intelligence headquarters, the Shanghai Intelligence Bureau, and the Tianjin Station; other Communist agents were at work in both of the foreign concessions’ own police forces.

The Red Brigade leader Gu Shunzhang was finally tracked down and arrested in April 1931 by Nationalist secret agents working with the Shanghai Public Security Bureau. Swiftly changing sides, he agreed to work for the Nationalists, giving Chiang’s agents, as proof of his sincerity, the name of the top-placed mole in their own intelligence apparatus. This man was a young doctor named Qian, who had risen to be confidential secretary to the head of the Nanjing Special Services Bureau. But since news of Gu’s arrest had been relayed to Qian, he had naturally decamped before he could be arrested in his turn, and had alerted Zhou En-lai and others to their imminent danger. As a warning to any other Red Brigade agents who might be tempted to defect or betray vital information. Communist assassination squads kidnapped Gu’s family and murdered them, burying their bodies in the garden of a safe house in the International Concession area. The decomposed bodies were discovered in late 1931, along with the bodies of dozens of other victims of Red Brigade reprisals and terrorist attacks, and buried in five different locations.

Curiously, this story of counter-espionage and mayhem, dramatically presented by Wakeman, ends on a note of patriotism. The Chinese learned a great deal from the Japanese assault on Shanghai in 1932, during which the industrial area of Zhabei had been almost leveled, and a collaborationist rule with Japan had briefly been installed. As the Japanese pressures on China increased year by year, finally erupting into open warfare between the countries in the summer of 1937, a curious new alliance was forged between all the various secret service, counter-intelligence, police, and criminal underground organizations. They now cooperated to accumulate intelligence for the Nationalist war effort, based first in Wuhan and then in Chongqing, far up the Yangtse River in the western province of Sichuan; to infiltrate the various institutions set up for collaboration in Shanghai and other eastern Chinese cities after the Japanese occupation; and, whenever possible, to assassinate Japanese collaborators. Some of these men had been identified by Nationalist police as long ago as Japan’s first savage but ultimately abortive attack on Shanghai in 1932. They had been left undisturbed on the grounds that for the time being their contacts with the underworld and with Japanese agents were too useful to be dispensed with. From 1937 onward, however, a large number of these collaborators were hunted down and killed by various members of the new Nationalist alliance.

As Wakeman reiterates in his thoughtful and downbeat conclusion, the story is by no means a simple one of Nationalist incompetence, or of the power of organized crime, or of the untrammeled power of foreign imperialism. One lesson he draws concerns the limits of police power in an atmosphere where too much is demanded at once, where roles are confused, where people entrusted with specific tasks of law enforcement run into situations and forces that undermine their efforts:

In retrospect, the Nationalists could hardly have chosen a more difficult and hostile environment for their experiment in municipal police reform. Shanghai’s extraterritoriality encouraged criminal enclaves that in turn forced policemen and gang members into the same clandestine brotherhoods. The port’s position as an entrepôt in the international drug traffic generated colossal illicit revenues that corrupted many senior police officials and vitiated the Nationalists’ revolutionary puritanism. The city’s centrality to the Chinese Communist Party’s labor movement focused the Public Security Bureau’s attention on “Reds” so exclusively that their other tasks, including the recovery of police sovereignty and the prevention of nonpolitical crimes, were compromised. And Shanghai’s exposure to amphibian invaders from the Imperial Japanese Navy twice wreaked havoc on municipal political institutions in general and on Nationalist police practices in particular, compelling the security forces to place militarization above regular civilian law enforcement.

It was Chiang Kai-shek himself who had all to boldly declared, in July 1927, that “if the Shanghai Special Municipality cannot be regulated, then China’s military, economic and communications [systems] will be in a hopeless tangle.” By concentrating on the apparently narrow history of police procedures, Wakeman has illuminated the much larger story of Chiang’s failure, and he has pointed to some of the main reasons for the ultimate collapse of the Nationalist regime on the mainland in 1949.