China. Our immediately following telegram contains text of a
message from the Prime Minister to the Foreign Secretary, London,
regarding our attitude towards developments in China. [1]

Any question of recognition of a Communist-controlled regime for
part or whole of China is obviously premature at the present time.

There are in fact suggestions that the Communists may not be
intending to set up any provisional Government until towards the
end of the present year. In the meantime the Nationalist
Government continues to be the officially recognised Government of
China.

The only realistic course however is to envisage a Communist
Government having effective control over the greater part of China
by the end of this year. We consider therefore that nothing is to
be gained by holding back now from establishing local
relationships with the Communists wherever practicable. We believe
that the adoption of a standoffish attitude towards the Communists
at this stage would be the surest way of bringing about what we
would all wish to avoid, viz, close co-operation with Moscow
against the Western Powers. One practical way in which relations
with the Communists might be placed on a working basis is through
encouragement of trade with Communist-controlled areas.

The message in my immediately following telegram is a commentary
on a telegram from the United Kingdom Ambassador at Nanking [2]
which reflected the views of his British Commonwealth colleagues
and which suggested that while trade offers made by the Communists
should not be rebuffed the Western Powers should avoid initiating
approaches to the Communists for resumption of business. We assume
this is also the United States' view. We think however that it
represents the wrong mental approach, and that on the contrary
everything possible should be done to encourage British and
American interests to foster resumption of trade within and with
China. In our view this offers the best hope of establishing
future relationships with China on a satisfactory basis of
continued contact with the West instead of orientation towards
Russia alone.

This and following telegram is for your background information for
use in informal discussion with Governments to which you are
accredited. [3]