255 Department of External Affairs to Embassy in Washington
Cablegram 309 CANBERRA, 31 May 1949, 9.00 a.m.
Our immediately preceding telegram.  China.
Following is message referred to.
With reference to the message of the United Kingdom Ambassador at Nanking to the Foreign Office, regarding a common economic policy in dealing with the Communists, we wish to make the following comments:-
The principles formulated in paragraph 5 of the communication raise the whole question of what should be the relations of Western countries with the new China. The question we must resolve is whether we should treat the new China as a potentially unfriendly country, recognising and having commercial relations with it only when the facts of the situation force us to such recognition, or, whether on the other hand, we should approach the new China with a view to assisting the Government, which is described as a Communist Government, to act independently of other Governments which are Communist Governments, by means of offering the new China full participation in international affairs, full trading and diplomatic relations with Western powers, and perhaps some administrative and technical assistance.
In relation to this there are several relevant aspects (1) the Communist Government would [appear]  to be the Government of the future: (2) the Western powers, in their own interests, will have ultimately to establish diplomatic and commercial relations with China; (3) the new Government in consolidating itself will be anxious to show results in terms of improved administration and increased welfare and will not hesitate to take advantage of any opportunity which will assist them in this regard, regardless of political ideologies (4) the Communist forces have quite deliberately treated foreign consular and diplomatic representatives and, as far as we can ascertain, foreign nationals, most discreetly; (5) whatever the Communist nature of the new Government its internal policies, so far, have national characteristics quite different from the usual pattern of Communist dominated countries in Europe.
Our own view is that as in any event all countries will be forced ultimately to recognize the new Government and to trade with it, nothing is to be gained by adopting the tactics suggested in paragraph 5 of the document prepared by Commonwealth representatives at Nanking.  This tactic is one of letting the Communists stew in their own juice. It may force them to co- operate with Western Powers, but it is far more likely to force them even more into Soviet domination. On the other hand, there is nothing to be lost, particularly as relations eventually have to be commenced, and perhaps something to be gained if the Western powers were to take the initiative at the appropriate moment, when the present Chinese Government can no longer be regarded as the Government of China, in offering the resumption of commercial and friendly relations and offering at the same time administrative and technical assistance.