4. Memorandum From John H. Holdridge of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1


  • Current State of Sino-American Relations, and Possibilities for the Immediate Future
[Page 13]

Since your last trip to Peking in June of 1972 there has been substantial movement in non-governmental contacts between the U.S. and the People’s Republic of China, but largely inaction at the governmental level (in the sense of lack of PRC response to several authoritative proposals that we have made to them for negotiations or contacts of a more formal nature).

In the cultural exchange area, the Chinese sent to this country in the second half of 1972 delegations of scientists and physicians on exploratory “friendship-building” missions. In both cases, the groups were hosted by the Committee on Scholarly Communication with the PRC, a “facilitating organization” that we had recommended to Peking in June. In addition, an acrobatic troupe made a highly successful tour of the U.S. in December and January, again under the sponsorship of a non-governmental organization that we had recommended to them—the National Committee on U.S.-China Relations.

In contrast, there has been minimal American “traffic” to China over the past six months. The National Committee was invited to send a 15 man delegation in December, and the top leadership of this group has now completed a successful visit to the PRC that included discussions with Vice Foreign Minister Ch’iao Kuan-hua and top commercial officials on exchange and trade issues. A number of American journalists visited the PRC for month-long tours in the fall; and U.S. businessmen were given increased access to the Canton Trade Fair in October and November. At the same time, the PRC has accelerated its effort to develop good relations with Chinese-Americans, in what is evidently an effort to erode a major constituency of the Republic of China on Taiwan. About 60% of all Americans traveling to China in the past year have been of Chinese ancestry; and in recent months Peking has made special efforts to bring groups of Taiwanese resident in the U.S. to the PRC for “friendship” tours.

In contrast to the above areas of activity, the PRC has not given positive responses to a number of official communications addressed to them via the Paris channel. A series of proposals presented in early November for sports and artistic exchanges, and a visitation by a group of state governors, has not been answered.2 In late July we proposed to the PRC that we begin negotiations on the issue of private U.S. claims against the PRC, but as noted in a memorandum to you of January 3 (at Tab A),3 their response has been an ambiguous one of expressing the intent to give our proposal “positive consideration,” while in fact focussing attention on the details of individual cases and putting off [Page 14] efforts to establish a general framework for the resolution of this impediment to the expansion of economic relations.

In political matters, the PRC has taken a low-key and two-sided approach to the Vietnam situation, at once expressing verbal support for their Indochina allies, but keeping the tone of their rhetoric against the USG quite cool. On December 22, Peking made an oral protest via the Paris channel in response to the damaging of one of their ships in Haiphong Harbor during a U.S. bombing raid. Throughout the past three months, PRC public statements have continued to call for a peaceful resolution of the Vietnam war, and they have avoided attacking the President by name. More recently they have asserted, however, that the U.S. “went back on its word” in not signing the October draft agreement to end the war; [less than 1 line not declassified] Chinese diplomats in Europe have begun to express doubts about the “sincerity” of the U.S. in ending the war. At the same time, the PRC leadership responded to the President’s New Year’s greeting cards by sending a standard card of their own to the President via Paris, and in late December Foreign Minister Chi P’eng-fei sent a cordial letter to Secretary Rogers thanking him for the exchange of language teaching materials and requesting that such exchanges continue.

Regarding the Taiwan situation, the Chinese have begun to suggest to foreign diplomats—as Mao did last July to French Foreign Minister Schumann—that Taiwan is not really an obstacle to the normalization of Sino-American relations. In addition, Peking’s media, as well as their “people-to-people” contacts with Overseas Chinese, have begun efforts to shape opinion among relevant groups of Chinese in the U.S., Japan, and Taiwan for “liberation” of the island.

Areas for Further Progress

Chinese authorities have indicated to several recent visitors that once the Vietnam war is concluded there will be an acceleration in the expansion of Sino-American relations. How far and how fast they might be prepared to move in governmental contacts remains to be seen. Following is a series of suggested bilateral actions which might be taken in the next six months or so which would visibly improve Sino-American relations and build the groundwork for more fundamental steps in the normalization process —particularly the eventual establishment of diplomatic relations. This set of issues would remove important obstacles to progress, yet each can be handled in such a way as to sustain both ambiguity and flexibility about the pace of progress in the normalization process.

Release of U.S. Prisoners

At present the PRC is detaining three American citizens. Two military officers, Major Philip Smith and Lt. Commander Robert Flynn, have been held since 1968 when their aircraft—involved in hostilities related [Page 15] to the Vietnam War—were shot down over Chinese territory. We assume that the PRC will be unwilling to release these men in advance of a prisoner release by Hanoi; but should progress on a peace agreement in the next month or two reach the stage of a return of American prisoners from Vietnam, it would create the context for the PRC to release these two men. Indeed, our expectation is that the Chinese are likely to release these men without our raising the issue with them as a gesture of good will in the context of an ending of hostilities in Vietnam, and as a demonstration of their desire for further progress in Sino-American relations.

A somewhat more complex case is that of John Downey, a USG employee held prisoner since Korean War days. Downey’s original life sentence was commuted by the Chinese in late 1971 to five additional years. In October of that year, and again in June of 1972, the Chinese indicated to us that prisoners might obtain early release on the basis of good behavior. Otherwise, they were non-committal when you raised the Downey case with them. We have had reports over the past two months that Downey’s elderly mother is in increasingly poor health. Thus, you may wish to raise again with the PRC the matter of Downey’s release as a humanitarian action which would give visible reinforcement to our mutual efforts to further normalize relations. We would not be surprised, however, if the Chinese took their own initiative in this case as well as with the release of Flynn and Smith.

Economic and Trade Matters

American trade with the PRC increased significantly during 1972, totalling over $170 million with the balance strongly in our favor. Interest in the China market among U.S. businessmen has expanded along with the increase in trade, and to cope with this we have taken steps, with your approval, to form the National Council for Sino-American Trade. We notified the PRC of the formation of this private group via the Paris channel in late December, and now are working with State, CIEP, and Commerce to bring this council into active being.

There remain several major outstanding economic issues in Sino-American relations which impede the development of trade. In July of 1972 we proposed to the Chinese that we begin negotiations on the question of private American claims against the PRC. The Chinese, as noted earlier, gave an ambiguous reply to our proposal, requesting additional information on specific cases. On January 3 we sent you a memorandum,4 on which you have not yet acted, recommending that:

  • — We supply the PRC with a summary of the Foreign Claims Settlement Commission decisions on private U.S. claims against them.
  • — We provide them as well with a recently completed Treasury census of PRC assets blocked by the USG.
  • — At some appropriate time you raise with PRC authorities the desirability of moving on the claims negotiations in order to further progress in the normalization process.

We have, in addition, learned that the PRC is very much interested in securing Most Favored Nation tariff treatment. At a time when we are planning to request MFN authority from the Congress for the Soviet Union, the PRC will undoubtedly feel discriminated against if we do not accord them equal status.

The PRC is also very interested in having a trade exhibition in the U.S., apparently because of their growing trade imbalance with us. PRC officials raised this matter with officials of the National Committee on U.S., China Relations during their recent visit to Peking, and suggested that the National Committee draw up a proposal for such an exhibition.

Two additional problems relate to textile exports and provision of end use information for products under U.S. Export Control. Chinese cotton textiles are entering the U.S. at an increasingly rapid rate. We have prevented Commerce from becoming too excited about this, but if imports continue, there will be complaints from the domestic producers and foreign countries whose access to the U.S. textile market is limited by negotiated quotas. With regard to end use information, the Chinese have not seen fit to provide such data. Unless they do so it will be very difficult to extend export licenses on a large number of products requiring that the purchaser provide assurance of peaceful end use. David Packard’s company is one of many producers now facing this problem.

It would be very useful to discuss with PRC officials these various economic issues. Moreover, most are interrelated, or can be utilized in an integrated scenario to achieve our objective of removing impediments to the smooth development of Sino-U.S. trade. The Chinese interest in a trade exhibition and MFN might be wrapped up in a negotiating package whereby we secure payment of private claims and unpaid bonds held by American citizens. This would remove the possibility of attachment of PRC products exhibited here (although this problem could be avoided by other temporary measures) or the impounding of any of their ships or aircraft which might call at U.S. ports. Solution of the claims and blocked assets issues would be a visible step which would improve the economic climate, thus making it easier for the President to request from Congress authorization to negotiate with the PRC an MFN agreement. In addition, we could explain to the Chinese the need for end use information and the type of data required, thus facilitating their purchases of U.S. products. The textile problem presumably can be worked out amicably if we go to them with a reasonable limiting figure, ask them to confine their exports to it, and negotiate on any differences.

[Page 17]

Permanent U.S. Representation in Peking

While PRC authorities were unresponsive to our low-key suggestion of October 1971 that we establish some form of permanent U.S. presence in Peking, progress on Vietnam and the concomitant prospect of a reduction in the U.S. military role on Taiwan may make the Chinese more inclined to accept some form of American representation in their capital. This might take a number of forms: a non-governmental “liaison office” for the purposes of coordinating trade and cultural exchange activities; a semi-official office for the same purposes, but staffed in part by USG employees who could perform communication and representational functions; or by an official presence of low visibility, such as a special interests section in the embassy of a friendly country already accredited to the PRC (presumably the British).

From the U.S. perspective a special interests section would be the preferred choice as this would give us maximum control over the selection of personnel and the conduct of affairs. However, it is our sense that at present the PRC is most likely to respond favorably to the notion of a “liaison office” related to trade and cultural coordination. Chinese trade officials, at their own initiative, mentioned to the National Committee delegation which visited Peking in December the past PRC practise of establishing unofficial trade offices with countries with which they do not have formal diplomatic relations. (This was the case with Japan and Italy before they established diplomatic relations with Peking, their trade offices then being converted to commercial sections of their embassies.) It is unclear whether this was a signal of Chinese intent. A good case can be made, however, that at this point in time interests on both sides would be served by some more formal point of contact in Peking (or offices established on a reciprocal basis in an American city as well) which would be less cumbersome than the indirect Paris channel.

Cultural and scientific exchanges are likely to expand significantly over the coming year, and the rather ad hoc planning and management arrangements which have been effective thus far will almost certainly have to be regularized. In addition, the development of Sino-U.S. trade would make reciprocal trade offices to facilitate exchange of information a logical development of value to both sides. A liaison office in Peking might be staffed by State Department specialists in cultural and economic affairs on “temporary leave,” and by representatives of the National Committee, the Committee on Scholarly Communication, and the National Council on Sino-American Trade in order to give the office a semi-official status. The Chinese might wish to establish a similar type of office in the United States, probably in New York City rather than Washington given the GNP Embassy in the latter location, as well as the proximity a New York office would have to their U.N. mission and to cultural and trading centers.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 526, Country Files, Far East, People’s Republic of China, Vol. 6, Jan–Apr 1973. Secret; Sensitive; Eyes Only. Sent for information. Kissinger initialed the memorandum and Richard Solomon initialed it on behalf of Holdridge.
  2. In telegram 204265 to Paris, November 9, 1972, the Department requested that the Embassy solicit Chinese reaction to possible visits to the PRC by several American groups involved in sports or music. (Ibid.)
  3. Attached but not printed.
  4. Attached but not printed.