CONFIDENTIAL
DSR 11C
SECTION V:
OPTIONS AND CONCLUSIONS FOR ARMS SALES AND CIVIL SALES
34. Over the next twenty years, China. will be preoccupied with her internal industrial development. Under her new
leaders, she wishes to modernise her backward industry and defence capability and plans to pray Western equipment and
technology in aid. This will offer considerable
opportunities for British industry.
The scale of this
should, however, not be exaggerated given the constraints
on China's foreign currency earnings, her unwillingness to accept long-term credit (although the credit picture may change) and the fact that Japan will continue to get the
lion's share of the Chinese market. But the UK could also
secure a significant share and certainly a better one than
she now does, both in the civil and particularly in the
military field, in which France is likely to be our only
major competitor.
35. Against this background, the options, of unrestricted
arms sales and no arms sales to China can both be excluded.
The option which emerges from the above discussion is that
the UK should permit arms sales which arguably do not
· increase Chipa's capability and do not involve classified
or advanced technology which the Chinese would not be able
to develop for themselves.
136.
CONFIDENTIAL
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