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25.
Sino-European Relations
There should therefore continue to be possibilities for other powers to exploit. The Western World and China will retain a common interest in preventing the further spread of Soviet influence, while the Soviet Union will remain inhibited in Europe by the need to devote resources to her frontier with China. The West can also hope to benefit from Chinese denunciation of Soviet pretensions to be the champion of the Third World and from their stinging criticisms of Soviet methods and motives. The countries of Western Europe, in particular, cannot afford to forget that, if anything should ever happen to weaken the American commitment to Europe, a closer alliance with China, in the face of Soviet expansion, might become a psychological, and perhaps even a practical, necessity. Economic ties will be strengthened if China and the EEC conclude a commercial agreement. (The Chinese already have a mission to the EEC and are having preliminary discussions with the Commission about the outline of such an agreement.)
Domestic Policies
26.
At home the achievement of the system created by Mao and Chou has been to provide the essential needs of the Chinese people: food, clothing, housing and fuel. The Chinese will continue to face periodic difficulties in feeding such a large population but the economy is now at a stage in which the production of goods above the subsistence level will become more important. No doubt, given time and a penalty in the rate of economic growth, the Chinese could make do on their own; but in practice the incentive to expand foreign trade and buy both technology and industrial plant will be very strong. The market for Western goods in these fields is therefore likely to grow. The need to modernize China's armed forces will also provide opportunities for Western defence industries and there are likely to be strong pressures to take advantage of these in spite of current COCOM regulations.
27.
Oil
Chinese oil reserves, proven and probable, onshore have been estimated to be at least 6 billion tons, and increasing availability of crude oil may help the Chinese to finance their overseas purchases. In 1975 the Chinese offered crude to Japan, the main purchaser, at prices competitive with OPEC sources. However, as the volume of crude exports increases, perhaps to a figure of 30 or 40 million tons a year by 1980, an important factor will be the high wax content of most Chinese crude, which requires special refining processes. Longer-term purchase arrangements are therefore likely to be necessary.
Stable trade relationships
28. Equally, the purchase of advanced techniques or products will link the Chinese with overseas suppliers on a much longer-term basis than they have been accustomed to when making purchases of grain, of raw materials, or of relatively simple pieces of machinery. These trends should be factors for stability in the outside world's relations with China. Ambitious plans will make Hong Kong more rather than less important as a source of foreign exchange.
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