I
DSR 11C
CONFIDENTIAL
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
to undertake fixed price contracts at a time of rapid
inflation. The Chinese may also have mistrusted the
British Government's policies towards the European Communit
which China wishes to strengthen, and towards the Soviet
Union. Now, however, the Chinese have made it clear that
they see the United Kingdom as an important potential sourd
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
5. .At present, China is particularly interested in
obtaining Western European assistance in the defence field.
There have been a number of recent visits and expressions
of willingness to purchase military equipment. This
primarily reflects China's need to improve her military
capability vis-à-vis the Soviet Union. Chinese equipment,
based for the most part on old Soviet models, is from ten
to twenty years out of date. It is true that China's
nuclear capability, the size of her army and the difficulty
of the terrain make a successful Soviet attack very unlikel
Nevertheless, Chinese leaders have made it clear that they
are giving high priority to modernising the equipment of
the Chinese armed forces. Given their ambitions on the
civil side as well, they will be reluctant to increase the
proportion of Chinese Gross National Product devoted to
Instead their aim appears to be to procure
defence.
/advanced
CONFIDENTIAL
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