I have the honour to submit herewith a memorandum dealing with
certain long-term effects of present and prospective developments
in China.

2. I desire to point out that American policy may be more broadly
based than I have assumed in the memorandum. It will be the desire
of the top-ranking Americans, particularly those on the civil
side, to establish a more progressive government in China, drawing
its support from all parties, including the Communists. This point
of view was emphasized recently in an official statement by Mr.

Dean Acheson on behalf of the Secretary of State. It may be
doubted, however, whether the American Government will succeed in
doing this. There are great difficulties in getting a working
agreement between the Government and their Communist opponents,
and the idea of a coalition government is contrary both to
tradition and to accepted political principles in China. American
intervention may therefore be inevitably associated with the
policy of the Central Government and be characterized as
reactionary.

3. I would appreciate it if a copy of this memorandum could be
submitted to the Prime Minister.

D. B. COPLAND [1]

24th June, 1946.

INTERNATIONAL ISSUES IN CHINA

[matter omitted]

The Weakness of China:

6. China is fundamentally a weak country, even on any impartial
examination of her potential resources. Her large population is
her greatest weakness, because it saps the energy of her people,
keeps them under-nourished and a prey to disease. The Chinese are
poor technicians, and they do not regard the profession of a
soldier as worthy of their best people. It will be a difficult
task for the Americans, with all their capital and technical
skill, to make an efficient army or industry in China. Added to
this difficulty is the extreme sensitiveness of the Chinese about
their sovereign rights. It was a British Prime Minister who said
that self government was more to be desired than good government.

Perhaps this might be quoted in extenuation of the attitude the
Chinese take up to their own administration. That would be taking
the most favourable view of things. The less charitable view is
that the Chinese suffer from a great conceit of themselves and
will never admit their own gross inefficiencies, though they are
always ready to ask for help. In the formative stage of external
intervention for the obvious benefit of China, the adjustment of
ideas to provide a basis for co-operation is usually conceded by
the Chinese, but never to the point of losing the opportunity of
exploiting the assistance they are receiving. When the inflow of
capital and technical skill has come to an end, a new situation
will arise. This is bound to cause difficulties. The success of
American enterprise in China will depend on the maintenance of
efficiency, both managerial and technical. It may be assumed that
the Chinese will not be equal to the task without constant
American guidance, and that they will also get very tired of this
guidance, especially when it takes the form of demand for some
reform to be made, or some key person to be demoted. There is
infinite scope in this situation for bitter recriminations and an
intense anti-foreign campaign, for which the Chinese are always
ready. On the more technical economic side of the American
intervention, it will be necessary, sooner or later, for the
Chinese to build up a balance of trade in which there will be a
substantial export surplus to pay the service of the external
debt. There is little prospect of this being done, not even with
the chances China now has of exporting many consumer goods to the
Eastern markets formerly held by Japan. It may be said that the
more thoughtful of the American experts in China are worried about
this aspect of the situation, and they have every reason to be.

Finally, it is a great mistake to think that China can build up a
strong base for her industrial development in her heavy
industries. Her resources of coal are adequate, but this is not
true of iron ore. The prospects are that Australia will be able to
keep in advance of China in steel output and certainly in costs of
production. China is deficient in oil, and her agricultural
practices are such that she cannot, without a great revolution,
produce a diet that will avoid undernourishment for some 70% of
her people. The objective of American policy is to build up 'a
strong, stable and united China'. In the modern world, with its
reliance on economic power based on technical and managerial skill
and the development of certain key industries, this would appear
to be a hopeless ideal.

An Explosive Situation:

7. China's weakness has always been a source of trouble, perhaps
the greatest single source of trouble in the Far East. In the
present situation, it is likely to be more troublesome in the long
run than at any other time in recent history. There are two
reasons for this. In the first place, the political needs of the
past four years demanded that both the United States and the
United Kingdom should flatter China and give the Chinese a false
idea of their importance in the world, as well as misleading their
own people as to what was really happening in China. With her new
status, China is able to assume a position far beyond her relative
strength, and this may become very embarrassing later when her
real weaknesses become obvious. In the second place, China stands
between two great opposing forces, both of which attempt to
influence her. There will no doubt be a contest for supremacy of
leadership between USA and Russia. At the moment, the Central
Government is leaning heavily on America, whose influence is
paramount, but it is not more than twenty years ago that many of
the people in this Government were leaning heavily on Russia and
carrying out an intense propaganda of hate against America and
Britain. It is undoubtedly to their interest to lean on America
now. Without the aid of America, it is not extravagant to assert
that the whole of North China and the North-East would now be out
of the control of the Central Government. These areas are in part
held by the Communists now, and, over the past six months, they
have rather expanded their territory in the north. It looks now as
though they may have to retreat in some areas, but they will do so
with great bitterness against the Americans. The Central
Government is able to hold office without attempting any reform,
partly again owing to American help, and there will be people
among the present leaders or their followers who will one day
exploit this. For, as already indicated, the day will come when
the partnership between American efficiency and Chinese
incompetence will break down, and when it will be necessary for
China so to arrange her economy that she can pay the legitimate
debt charge for the assistance she is now receiving. When that day
comes, there will be people ready 'to cash in' on the new reform
movement and the new anti-foreign feeling that will be created.

This will be Russia's day, and, in the meanwhile, Russia will
undoubtedly have improved her position in Manchuria and the border
regions to the west. She will have watched uneasily the Americans
building up military strength in China, and now they may have to
use it not only to sustain their own rights in China, but perhaps
also to fight the satellites of Russia, if not Russia herself.

This may be too gloomy a picture, but that it is a possible
picture nobody who studies the situation has any doubt. Because it
is a possible picture, the Far East is to be regarded as perhaps
the most explosive area in the world ...