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CONFIDENTIAL
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Mr Murray
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11/5
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HONG KONG: GENERATING EQUIPMENT FOR THE CHINA LIGHT AND POWER COMPANY
1. You asked for a progress note on the question of the China Light and Power Company's (CLP) plans for the purchase of generating equipment.
2.
The story began on 12 March when the Governor telegraphed the PUS to say that Sir Lawrence Kadoorie, the Chairman of the CLP would be visiting London to explore the idea of HMG's and British firms' supplying generating equipment at a "special negotiated price". The Governor explained that Sir Lawrence would need to sign a contract before the end of this year for the first of four new 350 mw unit generators for service between 1982 and 1987 (the initial requirement for coal would be 800,000 tons a year rising to 3.7 million tons by the end of the 1980s) and that he wished to buy British equipment because he appreciated the need for strong ties between the UK and Hong Kong and the importance of stimulating British exports to Hong Kong in the interests of Hong Kong's trade with Britain. The difficulty is that British equip- ment is probably 20%-30% higher in price than Japanese equipment and unless a special financial arrangement were to be made for the supply of British equipment, the rest of the CLP Board would insist on inviting international tenders, with the result that the business would almost certainly go to the Japenese.
3. Sir Lawrence Kadoorie visited London at the end of March. The DOI, who are the lead department, arranged for their Minister of State concerned, Mr Alan Williams MP, and Sir Peter Carey to see him and, later, the Prime Minister himself. Lord Goronwy- Roberts, who was put in the picture at that time about the CLP's plans, said that we must do everything to help and that he would be glad to see Sir Lawrence. In the event, there was not time to arrange a meeting with Lord Goronwy-Roberts before Sir Lawrence Flag A had to return to Hong Kong. I attach a copy of Mr Wright's
letter of 31 March reporting on the Prime Minister's meeting with Sir Lawrence Kadoorie.
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4. Following Sir Lawrence's visit, the DOI have been setting up a joint Whitehall/industry group to work out a package deal to put to the CLP. I attach a copy of FCO telegram no. 366 of 13 May
The next step will be a visit next month by Mr Stones, the Deputy General Manager of the CLP and Mr Michael Kadoorie, Sir Lawrence's son, for further discussions with the DOI.
(8) reporting on the latest state of play.
5. You are aware of what the Prime Minister said to the Japanese Prime Minister on 8 May and the action subsequently recommended
CONFIDENTIAL