CONFIDENTIAL
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WE TRUST THAT THE COST OF PROVIDING THE MECESSARY SPUR FROM
CLF'S TRANSMISSION SYSTEM TO THE CHINESE BORDER WOULD BE MET BY
CLP, WHICH MAY BE SEEKING A TENDER FROM BALFOUR BEATTY FOR
THIS PURPOSE.
(C) WE WOULD WELCOME YOUR ASSURANCE THAT THE INTERMEDIARY
COMPANY DESCRIBED IN PARAGRAPH 7 OF THE TELEX WOULD NOT SEEK
TO ADD A MARGIN ONTO THE PRICES OF GOODS SOLD THROUGH IT, IN EITHER DIRECTION, IN EXCESS OF THAT NECESSARY TO COVER ITS REASONABLE OPERATING EXPENSES AND AN AGREED AND REASONABLE
RETURN ON THE CAPITAL EMPLOYED.
6. I WOULD WELCOME YOUR URGENT CONFIRMATION THROUGH DEREK MARCH THAT THE REFERENCES TO YOURSELF IN OUR MEMORANDUM ARE ACCEPTABLE
AND THAT YOU SHARE MY UNDERSTANDING ON THE POINTS DETAILED ABOVE.
I HOPE YOU WILL AGREE THAT THE ACTION NOW IN HAND DEMONSTRATES
A CONSTRUCTIVE APPROACH TO THE SUBSTANTIAL OPPORTUNITY ARISING
FROM PROSPECTIVE CHINESE COAL SALES. WE ARE GRATEFUL TO YOU NOT ONLY FOR CREATING THE OPPORTUNITY BUT ALSO FOR YOUR CONTINUED CO-OPERATION IN ENABLING UK INDUSTRY TO BENEFIT FROM IT.
11. DRAFT MEMORANDUM FROM HMG
SALES OF COAL TO HONG KONG FOR CAPITAL GOODS AND ASSOCIATED
SERVICES.
THE POSSIBILITY OF COMPENSATORY TRADING BASED ON CHINESE SALES OF COAL TO HONG KONG HAS BEEN THE SUBJECT OF PREVIOUS DISCUSSIONS WITH THE PEOPLE'S REPUBLIC OF CHINA: NOTABLY THOSE BETWEEN MR EDMUND DELL, SECRETARY CF STATE FOR TRADE AND MR LI CHIANG IN NOVEMBER 1977, AND MR KU MING IN MAY 1978 AND MOST RECENTLY, BETWEEN SIR LAWRENCE KADOGRIE AND AUTHORITIES IN CHINA. HER MAJESTY'S GOVERNMENT (HMG) ENVISAGES THAT THE GENERALITY OF SINO-BRITISH TRADE WILL BE CARRIED ON IN THE NORMAL WAY. BUT HMG RECOGNISES THAT ENTERPRISES MAY FIND MUTUAL BENEFIT IN CONCLUDING COMPENSATORY TRADING DEALS AS A MEANS OF EXPANDING THE LEVEL OF TRADE BEYOND WHAT IT WOULD OTHERWISE HAVE BEEN.
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