[Received July 19 – 8:21 a.m.]

We advised President Roosevelt more than a year ago that the Communist problem in China could not be settled until the Soviet attitude toward the Chinese Communists was known to us and understood by Chiang Kai-shek. In compliance with this suggestion we went to Moscow late in August, 1944, for the purpose of ascertaining definitely the Soviet attitude toward the Chinese Communists. We did ascertain that attitude and we did recommend more harmonious relations between the Soviet and China…

We are convinced that the influence of the Soviet will control the action of the Chinese Communist Party. The Chinese Communists do not believe that Stalin has agreed or will agree to support the National Government of China and the leadership of Chiang Kai-shek. The Chinese Communists still fully expect the Soviet to support the Chinese Communists against the National Government. Nothing short of the Soviet’s public commitment will change the Chinese Communist opinion on this subject…

We are advising the National Government that if an agreement is reached with Russia the National Government can afford to be very generous in the political concessions it will have to make to secure the unification of the armed forces of China.

Before the Yalta Conference, I suggested to President Roosevelt a plan to force the National Government to make more liberal political concessions in order to make possible a settlement with the Communists. The President did not approve the suggestion.

I believe the Soviet’s attitude toward the Chinese Communist is as I related it to the President in September last year and have reported many times since. (See my Navy telegram NR 232355, December 23, 1944, to the Secretary of State.) This is also borne out by Stalin’s statement to Hopkins and Harriman. Notwithstanding all this, the Chinese Communists still believe that they have the support of the Soviet. Nothing will change their opinion on this subject until a treaty has been signed between the Soviet and China in which the Soviet agrees to support the National Government. When the Chinese Communists are convinced that the Soviet is not supporting them, they will settle with the National Government if the National Government is realistic enough to make generous political concessions.

The negotiations between the Government and the Communist Party at this time is merely marking time pending the result of the conference at Moscow.

The leadership of the Communist Party is intelligent. When the handwriting is on the wall, they will be able to read it. No amount of argument will change their position. Their attitude will be changed only by the inexorable logic of events.

The strength of the armed forces of the Chinese Communists has been exaggerated. The area of territory controlled by the Communists has been exaggerated. The number of the Chinese people who adhere to the Chinese Communist Party has been exaggerated. State Department officials, Army officers, newspaper and radio publicity have in large measure accepted the Communist leaders’ statements in regard to the military and political strength of the Communist Party in China. Nevertheless with the support of the Soviet the Chinese Communists could bring about civil war in China. Without the support of the Soviet the Chinese Communist Party will eventually participate as a political party in the National Government.