CONFIDENTIAL
from China into Hong Kong. Mr Ingersoll asked whether China was likely to press for the return of Macao now that the Government in Portugal had changed and whether such a move might not precede a request for the return of Hong Kong. Mr Evans thought not. Portugal had offered Macao to China in the Cultural Revolution when China had effectively made Macao impossible to govern, but China had turned the offer down. Mr Wilford said that the status quo in Hong Kong was not threatened for the present. China received £600 million per annum in foreign exchange from Hong Kong. This was 33-40% of her foreign exchange earnings. Mao had said that Hong Kong was 'a case for the young men to solve'. The question of a Chinese representative had not been raised with us since Chi P'eng-fei's visit to London in June 1973. The Chinese Ambassador did however talk about it to others on occasion.
This
10.
Mr Hummel said that the Chinese talked about Taiwan to third parties and tried to stimulate journalists into arguing that American progress on the issue was not fast enough. Ch'iao Kuan-hua had told a delegation of State Governors that China was dissatisfied with this progress. But the Chinese had not raised the issue with the Government. Mr Youde asked which Chinese expectations over Taiwan had been disappointed. Mr Hummel said that the Chinese seemed to have wished for a drop in the level of diplomatic representation in Taipei to the level of Chargé d'Affaires. had not happened. They were disappointed that Taiwan was given permission in December 1973 to open her last two consulates in the United States (in Portland, Oregon, and Kansas City). There seemed to be hopes that the United States would close their Embassy in Taipei and move to Peking. The United States had given no reason for such hopes. There was also disappointment over the American attitude to the representation of China in international bodies. The United States had always made it clear that she welcomed China's participation, but not at the expense of Taiwan. In the World Bank and the IMF it appeared that the Chinese wanted Taiwan thrown out, but did not wish to join themselves. Mr Wilford asked whether Chiang Ching-kuo was now in charge of the Taiwan Government and whether he would be able to carry on after his father's death. Mr Ingersoll said that Chiang Kai-shek was a symbol and that his presence stopped some policies being adopted. There would be no talks with the mainland while he lived. But he was rarely seen. Chiang Ching-kuo ran the Government and was capable of carrying on after his father died. Mr Hummel said that Taiwanese were now being brought into the local administration. Chiang Ching-kuo had even brought some into the Cabinet, but this had not lasted long. The regime remained a dictatorship. Chiang Ching-kuo was inflexible on principles. His recent severance of air links with Japan was an example. This inflexibility could partly be attributed to a fear that any sign of weakness would lose him support in Washington. Nevertheless, a community of interest did seem to be building up between the Taiwanese and the mainlanders, caused by common adversity.
11. Mr Wilford asked whether the Americans thought that the Chinese felt genuinely threatened by the Soviet Union. Our impression from Mr Heath's talks was that they did not. Mr Hummel replied that the
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4 CONFIDENTIAL
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