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INCOMING TELEGRAM DEPARTMENT OF STATE-DIVISION OF COMMUNICATIONS AND RECORDS TELEGRAPH BRANCH X ror DECRET 704 N Action: FE Info: Control 7661 SS C Rec'd December 22, 1948 DCR 8:22 p.m. FROM: Nanking TO: Secretary of State : ARCHIVES SERVICE* RECORDS NATIONAL AND NO: 2598, December 21, 5 p.m. and PERSONAL FOR THE SECRETARY FROM THE AMBASSADOR. May I outline below my personal views re political outlook in China and bearing of this on American policy. This is partly for record but chiefly in order to have full benefit of your instructions. As you are well aware my original hope had been that by military aid to Chiang government especially in form of advice upon which all else would be conditioned, it might have been possible to keep area south of Yangtse intact and clear coastal region from Nanking northward of militant Communism. It would have been expected that again with American technical advisers and economic aid there would be improvements in local government and in people's livelihood which would compare favorably with conditions in Communist territory. National Government would guard its frontier but carry on no aggressive warfare against Communists. This would allow public opinion to take form in both sections and be basis for some sort of negotiated settlement. Whether this would have proven practicable and results have justified our efforts now is immaterial. Dealing with present realities one must begin as always with President Chiang, It is distressing to observe how completely he has lost public confidence in recent months and how widespread is desire he retire. This DECLASSIFIED sentiment is E. O. 11652, Sec. 3(E) and 5(D) or (E) 7-15-75 OSD letter, By NLT- HG NARS Date 9-1376 mor school INFORMATION COPY