1 Chifley was acting Minister for External Affairs while Evatt was
overseas, from July 1948 to January 1949 as President of the
General Assembly.

Attachment

CANBERRA, 30 September 1948

TOP SECRET

POLITICAL APPRECIATION

This appreciation deals with the position of Australia, as a
South-East Asian country, in the event of a conflict between one
or more of the Western powers and one or more of the Eastern
European countries.

1. Position of China
For Australia, one of the most crucial factors in the event of
such a conflict would be the attitude of China.

It is quite impossible to forecast which, if either, of the two
Governments at present exercising authority over parts of China
will ultimately prevail. Presumably, in the event of conflict,
there would be fierce competition between Eastern and Western
powers for Chinese support. Presumably there would be large-scale
assistance given to the Government of the north of China from the
Eastern powers, and similar assistance to the Government of the
south of China from the Western powers. The result might be to
divide Chinese support between the two conflicting groups of
powers.

Whichever Government ultimately prevails in China as a whole, or
whichever Governments ultimately prevail in North and in South
China, Chinese longstanding ambitions in South-East Asia, outlined
below, which were temporarily thwarted by similar Japanese
ambitions, will still be pursued. In the event of a European
dispute in which China plays some part, the involvement of South-
East Asia is certain, regardless of the character of the Chinese
Government or Governments, and regardless also with which side
China aligns itself Australia, whether directly involved in the
main conflict or not, will be no less concerned than during
Japanese aggression in South-East Asia and the Pacific.

If the present Central Government of China becomes involved in
war, either with the government exercising authority in the north,
or with other powers, it will endeavour to mobilise the quite
vital resources of South-East Asia for its own war purposes. These
are the resources which Japan sought to acquire, and they are even
more vital to the Chinese economy. (See Appendix 'A' for a list of
the resources of South-East Asia in relation to the resources of
the Chinese economy. [2])
It has been argued (see paragraph 20 of Appreciation of Joint
Intelligence Committee No. 1/47 [3]) that China offers no threat
to Australia because she has become impoverished by many years of
war. But this is wrong reasoning. China always was and always will
be impoverished because of the poorness of her natural resources.

(See Appendix 'B' for description of resources of China and of her
export and import trade.) Her poorness supplies a pressing reason
for interest in the vastly rich areas of South-East Asia.

It is for this reason that it has been the consistent policy of
all Chinese Governments to retain the national sympathies of
Chinese throughout South-East Asia and the Pacific. China depends
for its future development on the remittances to home and other
assistance it can obtain from its overseas nationals. (See
Appendix 'C' for the number of Chinese in each of the countries of
this area.) Sir Frederic Eggleston wrote in May 1948:

'The Chinese Government is using its overseas nationals as a
spearhead of Chinese advance into other countries. China has
adopted a policy which endeavours to prevent her overseas
nationals from assimilating into the communities of the countries
to which they migrate. These overseas nationals are organised
politically, they elect representatives to Chinese political
bodies, and a comprehensive educational policy is being organised
from China; they are staffed by teachers trained in China,
inspected by officials of the Chinese Government, and employ text
books written in that country. Chinese abroad are encouraged to
resist compulsory education in the countries to which they
migrate.

It is quite clear that the Chinese abroad aim to become a separate
community not taking part in the life of the State but organising
and maintaining their own political status. The Chinese take as a
basis of nationality jus sanguinis so that Chinese overseas are
always regarded as subject to Chinese law.' (See Appendix 'D' for
a despatch by Sir Frederic Eggleston on Chinese overseas policy.)
In Malaya there is a majority of Chinese, and in almost all other
countries of South-East Asia and the Pacific there is a minority
which, because of its monopoly influence over trade and commerce,
has the effective influence of a majority. As Sir Frederic
Eggleston has pointed out, the Chinese Government has not only
encouraged these Chinese to retain their nationality, but has also
arranged for elected representation of overseas nationals in the
National Assembly. Recently, even in Australia, attempts were made
to hold elections for an Australian representative to the Chinese
National Assembly. British, Siamese, Indian and Philippine
Governments have had to protest at Chinese attempts to organise
elections for the National Assembly and Legislative and Central
Yuan amongst Chinese resident in their territories.

Moreover, throughout the area there are Chinese secret societies
which are essentially political movements and can be powerful
forces if directed. These societies are at the back of much of the
present trouble in Malaya. (See Appendix 'E' for further
information on these societies.)
Whatever Government is in power in China, therefore, whether it be
a Communist Government or the present Central Government in its
present or in a changed form, Chinese policy and interest in
South-East Asia win not change. Any open conflict between North
and South China, or any involvement in a broader global conflict,
will lead to increased interest in South-East Asia. A Communist-
dominated China, which could result from the present confused
political situation in China, and which could follow quickly on
the commencement of an East-West conflict, would certainly aim at
acquiring the use of the resources of South-East Asia, not by a
military action, as was the case with Japan, but by internal
action, using Chinese populations and the already organised
political groupings of secret societies. Presumably, too,
assistance in arms and munitions, at present lacking, would reach
the peoples of South-East Asia.

2. The Governments of South-East Asia
Already there are signs of movements along these lines. The
present Governments of South-East Asia are showing their concern,
as was evidenced by the protests regarding elections referred to
above. Some are already faced with organised revolution, or
organised sabotage. (See Appendix 'F' for a list of the
Governments with a brief description of their political
philosophies.)
Australians visiting the area find a position which can be
summarised briefly as follows: almost everywhere there are
moderate governments with strong left-wing groups threatening
their position. These groups are either included in the government
or are a recognised opposition party. The moderate governments,
but still more the left-wing minorities, are resisting French,
Dutch, British, or any other colonial influence. They are equally
opposed to being tied up with conditions which might be imposed in
consideration for American financial assistance. They are, at the
same time, conscious of the urgent need for capital equipment,
technical and scientific advice, and more especially
administrative experience. They therefore are inclined to look to
Australia, which is not a colonial power and has not the financial
resources to threaten them, for their required assistance and
advice. Failing such help, they feel they have no alternative but
to turn to the Soviet, which is prepared to offer on an almost
unlimited scale the technical and administrative advice they need.

The moderate Governments do not wish this, particularly as they
realise it is the end of their own Governments, but they have no
grounds for opposing closer Soviet relations in the absence of
assistance from elsewhere.

Perhaps one of the clearest examples of this process is in
Indonesia where we have been able to watch developments step by
step. Australia was able to uphold the moderate Government in the
Republic by holding out hope of the success of the Committee of
Good Offices. As time has gone on, the Republic has more and more
been forced to the view, which has been put forward by Russia,
that Australia has been acting in effect for the Dutch and the
Republic can achieve no results from the Committee. When this
point of view was beginning to carry weight, an Indonesian, who
had been in Czechoslovakia, returned with a Communist organiser.

Shortly after, the moderate government was faced with armed
opposition.

3. India
India, the only other power in South-East Asia with resources and
organisation capable of offering any threat to Australia in
association with a military power, is in a very different category
from China. She has minority populations in the area, especially
Burma and Ceylon, but they have not been organised in the same way
as the Chinese communities and do not constitute the same danger
to security. India's recent emergence as a self-governing nation
and her pressing political difficulties domestically have so far
prevented her from developing a coherent foreign policy in
relation to South-East Asian countries, save the vaguely expressed
aspiration to leadership in South-East Asia and the Indian Ocean
zone. She is therefore potentially a rival of Chinese ambitions in
South-East Asia and, while unlikely in the near future to initiate
any active steps towards asserting herself in that region, India
would certainly be very reluctant to see China established in a
predominant position there. Australian foreign policy should
therefore be directed towards encouraging this trend in India's
foreign policy and using it as a check to Chinese activities
(whether or not disguised as Pan Asiatic movements). The views
expressed in Appreciation 1/47 need amendment from this point of
view.

4. U.S.A. Interest
The United States Government has, until recently, taken little
interest in political developments in South-East Asia. In
Indonesia alone, after many many warnings and representations, is
the United States taking an active interest. The United States
Government has been interested financially and politically almost
exclusively in European developments. Meanwhile, the situation in
South-East Asia rapidly deteriorates. The 'Beat Hider First'
philosophy still prevails-Europe receives not only first, but
almost exclusive, attention. This in itself, together with a
forced withdrawal of French, Dutch and British influence, tends to
invite the interest in South-East Asia of those powers being held
or thwarted in the European area. Paragraph 18 of Appreciation
1/47, which postulates no Soviet activity in SouthEast Asia,
requires reconsideration from this point of view.

5. Defence Implications
In summary, the facts seem to indicate that neither China as such,
nor Communist influence as such, offers any threat to South-East
Asia, and hence to Australia, which will not be offset by other
national developments in India and South-East Asia. A combination
of communist influence, working through Chinese nationals and
taking advantage of Chinese policy, can threaten the security of
the whole area. The methods used in the initial stages, moreover,
would not be such as could be combatted by ordinary military
manoeuvres.

This broad picture, read in conjunction with the factual
appendices attached, has some important considerations from a
strategic and defence point of view. For instance, the conclusions
of Appreciation 1/47 would require, if it is held to be a valid
picture, substantial revision. Conclusion (b) that the U.S.S.R. is
the only major power against whom the British Commonwealth of
Nations is likely to be involved in a war, if implying no direct
threat from China or Chinese in South-East Asia, is misleading.

The conclusion (e) that likely areas of Australian participation
would be the Middle East and the Far East seems to ignore the
facts of South-East Asia.

Moreover, this picture has implications for defence preparations:

the type of equipment which might be required for South-East Asia
warfare: the preparations necessary to combat the undeclared
warfare of Chinese minorities: the degree to which Australian
resources can be committed outside South-East Asia.

6. Political Policy Implications
There are also implications which are relevant to foreign policy,
having in mind long-term strategic requirements. It is these which
are the main concern of the present appreciation.

In particular, the picture outlined above points to the need, in
strategic interests, of early and determined action along lines
such as the following:-

(a) A deliberate financial and industrial policy to meet the
developmental needs of the area: for example, the manufacture in
Australia of the specialised agricultural and other hardware
urgently needed in the area, the preparation of foodstuffs for
tropical areas, the processing in Northern Australia of the raw
materials of the area;

(b) The development of Northern Australia by the increase in its
population, and by the use of its resources for the benefit of the
near-north area;

(c) A deliberate policy to continue and extend the present
arrangements for giving scholarships and establishing libraries
throughout South-East Asia;

(d) A deliberate policy to make available technical and
administrative advice wherever required in South-East Asia;

(e) The provision of every possible facility for technical
training of apprentices and craftsmen from Eastern countries in
Australia's technical schools, workshops, foundries, etc.;

(f) A detailed examination of the resources, particularly the
minerals, of South-East Asia;

(g) A development of air routes to points in South-East Asia, and
the study of alternative air routes to Europe in the event of
present air routes not being practical because of local political
changes;

(h) The careful development of Radio Australia, based on a policy
of encouraging genuine nationalistic developments, and national
movements to combat foreign influences. (The production in
Australia of radios suitable to the tropical conditions is a
necessary accompanying action.);

(i) Treaty relations with Portuguese Timor and perhaps New
Caledonia by which air base facilities might be obtained, and by
which, at the same time, assistance might be given to these
countries (to the financial benefit of Australia) by the
development with Australian resources of products such as coffee,
cotton, rubber, oil and timber. Shipping is another problem of
concern to both places. (See Appendices 'G' and 'H' for summaries
of our economic relations with these two countries and for
detailed proposals.);

(j) Acting in Australian Territories to forestall any attempt to
exploit situations brought about by inadequate food, health, wage
or other standards;

(k) Consultation with United States authorities to enliven
interest in the problems of South-East Asia;

(l) An extension of Australian Consular posts in South-East Asia.

At present there are Australian Consuls at Timor, Batavia,
Singapore, Bangkok, the Philippines, and China. Gaps exist in
Borneo, Sumatra, French Indo-China, and Burma.

Along with this extension there should be arrangements to include
on the Consular staff observers with Defence background;

(m)Ministerial and Parliamentary missions to this area would
encourage the Governments and peoples concerned to believe that
Australia is willing and able to stand behind them in their
requirements and to make unnecessary the turning to any other
power;

(n) The encouragement of missions, officials, and businessmen to
visit Australia to obtain advice and materials and goods.

Such matters as these, which vary in importance and in
practicability, have an important long-term defence aspect, and
are best considered (though not executed) in a defence context. A
definite Government direction with respect to these matters would
make possible the necessary administrative action by the
appropriate civil or defence bodies within the existing
administrative framework. [4]

[AA:A1068/7, DL47/5/1, i]

2 Appendixes not published.

3 Volume 12, Document 160.

4 In a file note dated 29 December 1948, Moodie expressed hope
that authority would be given 'for energetic prosecution' from the
beginning of the new year of the 'practical 14 point long-term
programme to implement a. active Australian policy in South East
Asia'. He added that the defence aspects were 'of secondary
importance (except in the widest sense-of its aim to stabilise a
potentially dangerous area) since the matter is primarily
political'.