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[TEXT]
YOURTELNO 107: COAL FOR HONG KONG POWER STATION
1. We believe that it is important to keep a watchful eye on this potential three cornered deal to ensure that it does not go awry, particularly as the initiative was ours. The need for a co-ordinating role for HMG may arise depending on the progress of any individual discussions. We think that it is not entirely clear that our mining machinery companies recent discussions in China were about machinery
which is to be linked to the coal deal. Li Chiang spoke of two separate requirements; one for equipment per se and another for equipment linked with coal sales to Hong Kong.
You will also recall the Chinese Commercial Office interest
in how barter trade works. In terms of UK/China trade this
seems relevant only to the coal for equipment deal. Your paragraph 2 also seems to indicate some doubt as to, Chinese contentment and it would be useful if this could be
clarified with the Chinese.
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CONFIDENT IAL