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DSR 11C..
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late Mr Crosland as Foreign Secretary in May 1976.
9. The Secretary of State has invited the Chinese Foreign Minister, Mr Huang Hua, to visit the UK in the first half of 1978. During Mr Crosland's visit to China in 1976
invitation was extended to the Prime Minister to visit Chin This has been accepted in principle but there has been no
discussion of dates. The Prime Minister has informed the
Foreign Secretary that he is not prepared to form a view at present on the possibility of taking up this invitation.
Trade
10. For the past two years our trade with China has been in deficit on the visible account (UK exports 1976 £68 million; UK imports, £87 million). There is likely
to be a deficit of about £30-40 million in 1977 with
overall trade up about 10% by value. The UK's recent poor performance, in contrast with major competitors such as the FRG and France, has largely been the consequence of the inability of British firms to quote fixed price contracts because of high inflation during the last period when China was making major purchases abroaŭ (1973/74). However, during the recent visits of two major British industrial missions to China, led by Lord Nelson(Chairman of the Sino-British Trade Council) and Lord Roll, the Chine
indicated that they were aware of the competitiveness of British industry now. We may hope that they will ask for British tenders for major imports, especially of advanced equipment and technology, to support China's current drive to achieve the four modernisations' (agriculture, industry, national defence and science and technology) by the year 2000.
Defence Sales
11.
We have been aware for some time of Chinese interest in expanding UK/China trade in defence-related equipment, following the 1975 Spey engine contract. That sale was only authorised by HMG after a personal assurance from Dr Kissinger that the Americans would acquiesce in the
deal, although they were not prepared formally to lift the reserve they had put down in COCOM. During a recent visit
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