CONFIDENTIAL
DSR 11C
political considerations, historical perceptions and
constraints deriving from American relationships with
China's neighbours will continue to limit trade, while
This leaves military sales are likely to remain banned. Japan and Western Europe as the main sources of equipment
and technology for China. These are also areas which
the Chinese fear may not have the will to resist pressure from the Soviet Union. Strengthened economic
links between these countries and China would therefore
serve Chinese political as well as economic purposes.
4. Among China's economic partners in Western Europe,
the United Kingdom has in recent years played a
diminishing role (with fewer exports to China in
1976 than Italy). A main factor was the reluctance of
British firms in the early seventies to undertake fixed
price contracts at a time of rapid inflation. Chinese may also have mistrusted the British Government's
The
policies towards the European Community, which China wishes to strengthen, and towards the Soviet Union. Now, however, the Chinese have made it clear (most recently through the visit of the Chinese Minister of Foreign Trade) that they see the United Kingdom as an important source of equipment and technology in the civil and defence fields. As long as British exporters' terms
are competitive, substantial commercial opportunities are offered, to the advantage of British employment
and the balance of payments.
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