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3 Sir Lawrence would like the Chinese, supply the
bulk of the coal and opened discussions with them over
a year ago. At an early stage he suggested that UK
mining machinery and other equipment might be made
available to assist the Chinese to supply the coal and paid
for out of revenue from the coal. The Chinese officials
whom Sir Lawrence met on his visit have confirmed their
readiness to supply coal and their interest, in
principle, in a counter trade scheme. Discussions have
also been initiated on their purchase of power from
the Hong Kong power station.
4 This could be a commercial opportunity of some
magnitude. The scale of Chinese revenues from coal
sales may not be quite as large as Sir Lawrence suggests
but they are substantial. Moreover, the principle of
counter-trade is extensible to other raw materials indeed
the Chinese have indicated interest in doing so. They
have also recently concluded a major counter-trade
agreement with Japan and are understood to be negotiating
another with Germany. The attraction of this technique
to them seems to be as a cosmetic giving medium to
long term credit an ideologically acceptable complexion.
5 This Department has put proposals to ECGD, FCO
and Trade. Grating.
If agreement can be reached,
we plan to consult Sir Lawrence Kadoorie shortly before
putting an outline scheme to the Chinese.
DOI
officials are hoping to visit Hong Kong and Peking in
early July.
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