CONFIDENTIAL
Sir Edward Youde, KCMG, MBE British Embassy
PEKING
Foreign and Commonwealth Office
London SW1A 2AH
28 June 1977
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HONG KONG POWER STATION PROJECT
1. Your letter of 2 June was only received on 12 June. sorry an answer has been delayed.
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2. The Department of Industry are, as you say, taking the lead in dealing with the response to Sir Lawrence Kadoorie's approach. HKGC are looking after the Office's interest and are in close touch with the DOI. Both John Stewart and I have been keeping an eye on what may turn out to be a very important venture both for British industry and in other ways.
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3. I think you have seen most of the telegrams which have been exchanged between the DOI and the Governor and, more recently, the BTC in Hong Kong but not, I have discovered, our telegram No.40 of 4 June to the BTC which contains the DOI's package offer. This telegram, a copy of which I enclose, was despatched over the Silver Jubilee holiday and was not, by an oversight, repeated to you. will see from (viii) in this telegram that we have said we will provide the China Light and Power Company (CLP) with all the assistance we can to facilitate exports of coal from China to Hung Kong and the sale of UK mining equipment to China.. (This is, of course, the same point that Sir Peter Carey put into FCO telegram No.366 of 13 May, on which you have commented in your letter.) DOT have continued to include the "Chinese dimension" in their package in order to show the CLP that they are prepared to explore every avenue in their efforts to come up with the kind of new and imaginative package that Kadoorie had said from the beginning that he wants. However,
the DOI are under no illusions about the extent, if any, to which it may be possible to draw on Chinese supplies of coal for fuelling the new power station and, to use this as a lever for promoting further sales of British mining equipment to China. We took on board straight away the point you made in your telegram No. 24 of 11 May to Hong Kong, that it is likely to be some time before the Chinese make up their minds about whether or not they will play ball with the CLP. In these circumstances, we are all agreed at this end that we should concentrate on the short-term and more tangible objective of trying to win the business with the CLP, leaving on one side the question of fuel supplies for the generating equipment. In other words, we do not want to run the risk of missing out with the CLP by chasing after the possibility of Chinese involvement, though we want to give the CLP the impression that we are sufficiently far-sighted to take it into account.
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