Our immediately preceding telegram. [1] 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] [2] 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. [3] 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.