POSSIBILITY THAT DENG XIAOPING (TENG HSIAO-P'ING) MAY DISPLAY FLEXIBILITY ON CLAIMS VS. FROZEN ASSETS AND MOST FAVORED NATION (MFN) ISSUES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00100R000300080031-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 16, 2016
• Document Release Date: October 25, 2004
• Sequence Number: 31
• Publication Date: January 5, 1979
• Content Type: MF

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THE DIRECTOR OF CENTRAL INTELLIGENCE
National Intelligence Officers
.5 January 1979
VIA Deputy Director, National Foreign Asses
FROM .
MEMORANDUM FOR: Director of Central Intelligence
tia ona me igence Officer for China
SUBJECT Possibility that Deng Xiaoping (..T.en.g Hsiao-ping)
May Display Flexibility on Claims vs. Frozen
Assets and Most Favored Nation (M) Issues
1. Action: That you sign the memorandum to Secretary Blumenthal
on the above subject (Tab A).
2. Background: An important step forward in post-normalization
US-PRC relationships would be the settlement of the long-deadlocked
issue of exchanging blocked PRC assets in the US to meet American
financial claims against the PRC. Granting MFN treatment to the PRC,
which the Chinese want, would also add to the warmth of our relations.
The two issues are likely to arise during Deng Xiaoping's visit, and
Secretary Blumenthal will also address them further during his own
visit to China 14 February through 1 March. He would like a.memorandum
from you addressing the question of whether or not you believe Deng is
capable of displaying the kind of flexibility we will need from him to
meet our legal and Congressional requirements.
3. Staff Position: We believe that Deng on balance will be able
to show the desired flexibility. He is the heir of Chou Enlai, who
in 1973 went a long way toward meeting our needs on the claims/assets
issue, and it is possible that the deadlock which occurred later came
when Chou faded from the scene in 1974 due to illness and the "gang of
four" began to usurp his power. The "gang" has now been eliminated,
Deng's influence on PRC policy has become paramount, and from the
?STAT
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very circumstances of normalization we know he is a realist and a
pragmatist. We also know that he would like MEN (see Tab B for his
reference to MFN in his remarks to US journalists in Peking on 4
January). Thus, while some hard Oriental-type bargaining may be
ahead, there is a strong chance that we and Deng can reach agreement.
25X1A
Distribution:
Orig. & 1 - Addressee, w/atts.
1 - DDCI, w/atts.
1 - D/NFAC, w/atts.
1 - ER, w/atts.
2 - NIO/CH, w/atts.
1 - NFAC Reg., w/atts.
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SECRET
 The Director of Central Intelligence
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? ? L1'ashi%ton.D.C 20505
8 JAN 1979
MEMORANDUM FOR: The Honorable W. Michael Blumenthal
The Secretary of the Treasury
SUBJECT: Possibility that Deng Xiaoping
(Teng Hsiao-p'ing) May Display Flexibility
on Claims vs. Frozen Assets and Most Favored
Nation (MFN) Issues
1. In view of your plans to address the subject issues with
Deng Xiaoping, I felt that my thoughts on?Deng's ability to display
flexibility may be of interest to you.
2. Briefly, I believe that Deng is capable of providing the
kind of flexibility which we need. Deng is Chou Enlai's heir, and
it is noteworthy that Chou went a long way toward meeting pur
position or. the claims vs. frozen assets issue before he began to
fade from the scene due to illness in mid-1974. It appears very
likely that the hardened position which the Chinese then adopted
was the result of Chou's political opponents (the "gang of four")
finding opportunities to circumscribe his authority as he weakened
physically. However, the "gang" has now been eliminated, and PRC
policies have been restored very much to the place where they would
probably have been if Chou had not died. Deng 's own influence over
PRC policy has also become paramount.
3. In addition, Deng has a reputation for being a realist and
a pragmatist who refuses to be bound by ideology. His penchant for
setting ideology aside to gain results was the primary cause for his
purge in 1966 and again in 1976 (he was known as a leading "capitalist
roader" on both occasions). Moreover, we know from his role in the
normalization negotiations that he manifested considerable flexibility
on key issues.
4. We also know that Deng very much wants MEN, as indicated by
his remarks to American journalists in Peking on 4 January. This
desire, combined with Deng's other qualities as indicated above,
suggests a negotiating position which should contain sufficient
flexibility to give us what we need.
SECRET
STAT
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 SECRET
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S. However, we can probably anticipate some tough Oriental-style
bargaining ahead in reaching agreement. Deng is a very strong nationalist
who wants the best for China, and who will defend vigorously what he
perceives to be its basic interests.
/s/ Stansfield Turner
STANSFIELD TURNER
2
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