General Chou En-lai, influential Communist leader and their
representative in Kuomintang, lunched with me today.

It is his opinion that Japan's next move would be directed at
Siberia, India, China in that order, and that recent Japanese
attacks on Communist positions in the north suggested that move
against Siberia is not unlikely.

Other than to remove the menace of Darwin as an Allied point of
counter-attack he considers that Australia was in no danger from
Japanese invasion.

He went on to say that past experience has clearly demonstrated
that constant friction between Japan's Industrialists and Military
will severely handicap her efforts of reconstruction and
utilization of raw materials and natural resources in occupied
territories.

He considers that this year will be a trying one for the Allies as
they are defending a vast front with minimum equipment, but that
with America coming in 'full swing' and Allied counter-offensive
would be possible next year.

We discussed at length land system and finance for farmers though
he was alive to the injustice of the system to the peasantry he
appeared to accept the view that no reformation was possible
during war time.

He anticipated another Japanese attack on Changsha as an effort to
prevent the sending of further Chinese troops to Burma.