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reunification. Talks on a basis of reciprocity had been proposed in which the KMT and the CCP would cooperate for a third time. These proposals were reasonable and would ensure a bright future for Taiwan. They were also beneficial to the further development of Sino-US relations and peace and stability

in Asia and in the world. The US had no right to see more arms

to Taiwan. If it continued thus to intervene in China's internal

affairs its aim could only be to keep Taiwan under its control

or to allow Taiwan to become an independent political entity.

If the US were fully to understand the view of the Chinese

Government and the feelings of the Chinese people, and to abide

by the principles of the joint communiqué on the establishment of diplomatic relations and to respect Chinese sovereignty and

territorial integrity, the Taiwan issue would not prove difficult

to resolve. If on the other hand the US were to disregard the

'firm stand' of the Chinese Government there would be 'stagnation

and retrogression' in Sino-US relations. Nevertheless, although China did not lightly disregard matters of principle, on concrete

issues its attitude was always 'reasonable'. China did not

intend to bring Sino-US relations to deadlock, but on the

contrary hoped for further development on a basis of equality

and mutual respect for sovereignty and territorial integrity.

16.

In reply Mr Atkins emphasised that Sino-US relations

were a matter of concern to all friends of China and the US:

nobody (except the Soviet Union) wanted to see stagnation or

retrogression. So far there had been no serious developments:

the US was aware of the strength of Chinese feeling. Mr Atkins asked whether any sudden changes were expected. Mr Zhang replied

that this depended on the US : no other country could influence

the situation. Referring to Mr Zhang's statement that there was

a limit to China's tolerance and that the present situation could

not be allowed to continue indefinitely, Sir P Cradock said that

this implied that even if nothing specific happened Sino-US relations could deteriorate. This was worrying for friends of China and the US. Mr Zhang replied that he had meant that US

arms sales to Taiwan could not be allowed to continue indefinitely.

CONFIDENTIAL

/The matter

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