Your telegram 66. 
Paragraph one of my telegram 164  was sent not because I contemplated early departure but in order that I might have approval for staff changes which would be necessary when I did leave and especially for temporary employment of Military Attache as Consul General Shanghai.
2. All Heads of Missions here have taken it for granted that they would be withdrawn eventually probably for 'consultation' (see paragraph 3 British Ambassador's telegram repeated to United Kingdom Representative Canberra as number nine). 3 Afghan Minister has, already, orders to leave and the United States Ambassador contemplates leaving in possibly five or six weeks time. We British Commonwealth Ambassadors expect to remain until most other Colleagues have left in order to do all possible to protect our national interests and to establish contacts with Communist Regime.
3. Principal reason for such withdrawal is that when the national Government to which we are accredited ceases to exist 'de facto' the already slight fiction that we have any status will be at an end. We will no longer have any claim to privileges of an Embassy except on the grounds of courtesy and present indications (vide paragraph 6 below) are that duties may not be lessened by this. It would be neither dignified nor to the credit of our country to have representative here in such a position.
4. Moreover our presence here could be an embarrassment to you in discussions which inevitably will precede recognition of the new regime, and might be utilised as a means of pressure on you. Such recognition will of course have to be followed by the accrediting of Ambassador with all the usual formalities, request for agreement etc.
5. Another reason for recall is that little can be done here in Nanking which is already virtually a backwater. No important Communist personality is here except for Liu Po Cheng, the Mayor, who declines to have any contact with any of us. Otherwise, there are only junior officials and everything has apparently to be referred to Peking. We are not yet allowed to move outside the city. We hope shortly to be allowed to visit Shanghai but I see no hope of being allowed to visit, say, Peking to establish direct contact with the present centre of events.
6. Despite a series of informal approaches, local authorities have done nothing to grant normal diplomatic privileges, e.g.
communication with you in cypher and by bag etc. They have declined to license more than a proportion of our cars and refused all licences to cars of service attaches. There are disturbing signs that they may intend to refuse diplomatic privileges until recognition is withdrawn from the Nationalist Government despite the fact that they have no Government which we could recognise.
Actually when the Nationalist Government leaves Canton and our representatives do not go with it, it will virtually end 'de facto' recognition. End of De jure recognition is a matter to be decided presently by States after consultation and is, I imagine, involved with the Status of China on U.N. Council etc. We are trying to persuade them that it is premature to raise such questions until there is a Communist Government established, which is unlikely to be until October or later. Very shortly we will have to press for decision regarding cyphers, etc.
7. Some of us have been making every effort to open relations with the Communists but most have been fruitless for the Communists refuse to meet us. There is no [Ministry of Foreign Affairs]  here but only a Bureau, for dealing with foreign nationals, staffed by junior officials. Our contacts with it friendly but show no signs of developing beyond purely semi-official basis. I have had informal talks with friend and ex-official now in Communist employment. The Secretary, on basis former friendship, of fluent knowledge of Chinese, has established good relations with the head of the Bureau. The United States Ambassador sees, occasionally two or three ex pupils now on the Communist [ranks].
That is the sum total of our contacts after six weeks of effort.
When we can go to Shanghai we may do better.
8. Report in paragraphs 6 and 7 is not encouraging but I do not give up hope or intend to relax my own efforts or my influence on others to exert theirs. But your telegram suggests, that from Canberra things seem much easier than they are in Nanking where, at the moment, they are not encouraging. I am not depressed yet but it is disappointing to feel that you think we are exhibiting neglect and showing lack of realism, effort and initiative.