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East. The subsequent broakdown in the Kuomintang-
Communist negotiations nullified the purpose of the
Bill and it was subsequently dropped in the face of
strong opposition from those who held that it would
merely encourage a continuance of the civil war.
Limited supplies of arms and ammunition were, however,
made available to Chiang Kai-shok's Govornimont, but
ceased about August, 1946, when the civil war became
suddenly intensified. Shipments are believed to have
been resumed recently to a small extent, possibly by way
of consolation for the lapsing of the $500 millions
Import-Export Bank crodit.
9. Like ourselves, America is mainly interested
in the creation of a strong, stable, united China which
will provide a market for American exports and serve as
a stabilising influence in the Far East. To that end
she is anxious to see the ascendancy neither of the semi-
fascist, totalitarian, reactionary elements in the
present National Government, nor of a communist regime
ideologically hostile to western interests.
On the
other hand, the collapse of the Kuomintang-Communist
negotiations and the recent proscription of the Communists
by the National Government have defeated any hope, for
the time being at least, of the formation of a truly
national all-Party government in which the Communists
might be represented. It may be therefore that the only
course now open is to encourage the creation around
Chiang Kai-shek of a government which, by the inclusion
of liberal clements, would restore confidence in the
administration and rally support from those who now
criticize and condemn the Kuomintang for its inefficiency,
/corruption