IF we are to take at their face value the statements of responsible members of the Chinese Central People's Government, they are desirous of maintaining trade relations with Britain 'on a basis of equality and mutual benefit'. British trade with China was restricted at the beginning of the Korean war before the general United Nations agreement; oil and the other principal war materials were then excluded, and since I95I the strict observance of the embargoes agreed upon by the United Nations has still further affected the trade. As a result any goods which could by the widest stretch of the imagination be regarded as being within the category of war materials could no longer be exported from Britain or Hong Kong to China. China has, nevertheless, continued to trade with us within the limits thereby imposed. The pattern of that trade, both in respect of the method of conducting it and the nature of the goods exchanged, quite apart from the effect of the embargoes, has altered considerably. The British trader is naturally concerned to estimate the degree of permanence that may be anticipated for this changed pattern in order that he may know to what extent and in what manner he should adjust himself to meet it. Another and wider issue is likely soon to be presented for consideration. The signature of the Korean armistice and the political conference that is to follow raise the hope that a basis of settlement may be reached which will remove the immediate causes of friction between the Western democracies and the Communist bloc. I believe that it is the wish of the Central People's Government to withdraw from Korea and to avoid any further adventures outside their present borders in order to be able to reduce their military expenditure, to concentrate on the consolidation of their political hold over the country, and to go ahead with its reconstruction and with a programme of industrialization. It is probable that the main reasons for China's incursion into Korea were the protection of the power supplies on the Yalu River, which are vital to much of Manchurian industry, coupled with her ancient anxiety about the control of Korea by a hostile Power. It will be remembered that China did not intervene until it appeared likely that North Korea would be overrun by the United Nations forces. She has successfully prevented this, and it must be assumed that she will not accept any final settlement which leaves North Korea in potentially hostile hands. The cost of this intervention has been great, both in terms of manpower, and particularly of material resources, and the continuation of this drain has proved quite incompatible with China's 4I8