CONFIDENTIAL

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9. I agree with the anlaysis in paragraphs 15 and 16 of your despatch. I also agree, on balance, with

your conclusion that the general message coming out

of China is hopeful and provides us with encouraging

opportunities. But we need to guard against the

in fact

possibility that the pot might/boil over at some

point and that modernisation might again be abandoned

in favour of more inward looking policies and a reduced

involvement with the outside world. It makes sense

in terms of our world wide interests to do what we

can to prevent this happening and I shall continue

to look to you to monitor developments carefully.

We must keep our eyes open and remain broadly in

step with like-minded countries. There are risks

to be taken but I agree with you that we should

respond positively and work for a relationship with

China which was not a practical possibility for

previous generations.

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