225 Smyth to McIntyre

Minute CANBERRA, 13 February 1948


You asked me a few weeks ago to write an appreciation on this subject and the attached tentative ideas are submitted for your perusal.

2. The chief conclusions are as follows:-

i) Although our economic interest in China is small at present, China's strategical and political importance can hardly be over- estimated.

ii) It is therefore desirable for us to have as good a representation there as possible. It could be strengthened by:-

a) building up a cadre of language specialists b) appointing a military attache and possibly an assistant military attache c) retaining the Consulate-General at Shanghai, and future consideration to be given to establishing consulates elsewhere in China.

iii) We should concentrate on building up the countries of South East Asia and strengthening our ties with them. We should maintain our links with India but at the same time should remain on as good terms with China as we can. Good relations can be assisted by a) raising the post to an Embassy.

b) concluding the Treaty of Amity.

c) modifying, or at least applying with more tact, the White Australia policy.

d) continue our supplies to China under the UNRRA [1] programme.

e) ensuring that we receive good publicity.

iv) The greatest danger to our interests would be a Sino-Soviet rapprochement, whether caused by a communist victory in the civil war, or a policy switch by the Government. The best hope for a democratic China, in view of the ultimate totalitarian tendencies of the Communists, and the ineffectualness of the 'Third Parties' and the exiled War-Lords, probably lies in the liberal elements inside the Kuomintang, whom we should encourage as much as possible. Desiderata include a speedy and effective Japanese Settlement: and an end to the Civil War, possibly by giving the Communists autonomy in certain areas.

1 United Nations Relief and Rehabilitiation Administration.

[AA: A1838/283, 3107/38, ii]