Perceptions as well as realities have always played an important role in international politics and it is frequently difficult to separate the two. By the 1960s the realities of increased American involvement in South east Asia and a more militarily and politically influential China heightened the possibility of a Sino-American confrontation. It is the thesis of this study that the United States and the People's Republic of China, both fearful of that possibility as a spill-over from the conflict in Indochina, reached a tacit understanding limiting their involvement. This understanding was transmitted through a series of subtle public signals and, quite possibly, by a number of confidential communications. The primary motive was to prevent an unwanted Sino-American con frontation which could have resulted from a misperception of intentions. As will be demonstrated in this study both Peking and Washington sought, on a number of occasions, to transmit their intentions in order to prevent misperceptions and possible over-reactions.

There were various objectives behind the decision of the Chinese Government to launch a land reform movement in 1950. In political terms, it served to eliminate a serious obstacle to the consolidation of its authority by depriving the landlord class of the roots of its power. In economic terms, the redistribution of essential resources (draft animals, seed, tools and buildings as well as land) promised to release rural forces of production. In terms of social welfare, too, the change in land relations was likely to be beneficial if it were accompanied by a more equitable distribution of agricultural output.

Dr Lardy (in The China Quarterly, No. 61, March 1975) denies that the economic decentralization of the late 1950s impaired the ability of the central government to control allocation of economic resources. If such impairment had occurred, he argues, “ More developed provinces with high remission rates in the period before decentralization would have vastly greater resources at their disposal which they could use to maintain or increase the level of health, education and welfare (HEW) services they provided to their populations. Because provincial remittances would be reduced the central government could no longer subsidize areas previously dependent on net central government subsidies. Thus I hypothesize that the level of HEW expenditures in these areas would decline after decentralization as compared with the previously less dependent provinces. Similarly I hypothesize that the share of total national investment in provinces with proportionately greater fiscal resources would have increased sharply while the investment shares of the less developed provinces would have declined” (pp. 33 and 36). Dr Lardy's calculations indicate that “the dependency variable is significant but its effect is exactly the opposite of that predicted by the ‘decentralization hypothesis.’ That is, provinces that were more dependent on the central government prior to 1958 experienced larger increases, on the average, than did the less dependent provinces” (p. 38). “These tests,” he continues, “do not support the view that the decentralization measures transferred resource allocation power to provincial governments ”(pp. 38–39). Dr Lardy draws the conclusion that “ The central government's continued control of the fiscal system assured that the level of social services provided in the less developed provinces did not decline compared to more developed regions.”