CONFIDENTIAL
- 2 -
Defence Sales
4.
Ministers decided in June that our approach should be on a case by case basis. The Prime Minister subsequently minuted that he did not wish the UK to be the first to sell offensive equipment
to the Chinese. Other Europeans seem to be approaching the problem with caution. Rolls Royce have now been authorised to start
negotiations for the sale of marine gas turbines. This should encourage the Chinese to press ahead and show the practical extent of their interest in a number of items of British Army equipment. After visiting the British Army Equipment Exhibition this summer, they have indicated preliminary interest in a number of items such as tanks, lasers, optical equipment, fire control and small arms. They are also interested in naval communications equipment (Marconi ICS3). Tanks would prove difficult, but further exploratory
discussions over the less contentious items are already in progress.
5. On Harrier, the Chinese appear to recognise that the ball is in their court following the visit to Farnborough by a Chinese
technical team.
There are indications that their interest is
hardening in the direction of buying outright rather less than 50 Harriers, while seeking production rights for manufacture under licence in China. However the Chinese have still not made their requirements specific and are probably awaiting a green light from us before committing themselves to a firm request.
Pending this clarification
and more general discussion on arms sales with the Americans and our principal COCOM partners, we need to buy time on Harrier. We can probably do this by making clear to the Chinese that the British Government is prepared to look seriously into ways of meeting their interest provided it can be stated in more explicit terms, and by encouraging them to come forward on other items first.
- 2 -
CONFIDENTIAL