W
CONFIDENTIAL
DSR 11C
Europe could play an important part in assisting the
rapid modernisation which China seeks.
26. Among China's economic partners in Western Europe,
the United Kingdom has in recent years played a
diminishing role (with fewer exports to China in 1976 than
Italy). An important factor was the inability of British
companies to quote fixed prices during the last Chinese
buying round because of rapid inflation in the UK. The
Chinese may also have had doubts about the viability of
the UK economy.
Now, however, the Chinese have made it
clear (most recently through the visit of the Chinese
Minister of Foreign Trade) that they see the United Kingdom
as an important source of equipment and technology in the
civil and defence fields. As long as British exporters'
terms are competitive, substantial commercial opportunities
are offered, to the advantage of British employment and
the balance of payments.
27.
In a number of recent military exchanges, China has
shown renewed interest in foreign defence philosophy,
technology and equipment. This reflects, not a change in
strategic priorities, but rather the need to improve her
military capability to counter the threat from the USSR.
Chinese equipment, based for the most part on old Soviet
models, is from ten to thirty years out of date. It is
true that China's nuclear capability, the size of her army
and the nature of her terrain make a successful Soviet
attack leading to the capture of wide areas of China very
unlikely. Nevertheless, Chinese leaders aim, in the long
term, to modernise the armed forces; immediately it seems
that a limited programme of selective improvement is to
/berin
CONFIDENTIAL
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