DSK 11C
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[hynen?]
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CONFIDENTIAL
1976 003
most important market. Over a third of UK exports is made
Was
up of aircraft; the remainder is predominantly ron and
steel products and machinery.
27. The United Kingdom's recent poor performance is
explained primarily by the inability of British firms to
compete effectively with the fixed price contracts on which
the Chinese insisted during their previous buying round in
Rustan's
1973-74. During this period our competitors, primarily
Japan and the FRG, secured large contracts for steel and
mechanical plant, power stations and similar projects.
The
Chinese placed few orders in 1975 and 1976, a period of
political uncertainty and doubts over the wisdom of importi foreign technology, so exports to China in 1977 are
generally well down. With the much more positive attitude
of China's new leaders towards foreign trade, as part of he. modernisation programme, there is likely to be a steady
increase in the number of orders placed in the West from
1978 onwards, particularly for advanced machinery and
technology.
28. The scale of this increase will depend on Chinese
ability to increase their hard currency revenues, the
availability of Western credit and the willingness of the
Chinese to use it. Though China's hard currency earnings
should grow steadily in coming years, no sharp increase
seems likely in the short, term. Oil is an important hard
currency earner, and the Chinese have abundant reserves
(estimated at 20 billion barrels). But the quality is
generally poor, and importing countries, particularly Japan
are reluctant to invest in the necessary special refining
/equipment
CONFIDENTIAL
D 107991 400,000 7/76 904 953