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Premier Hua said that he wished the Prime Minister to know

that the Chinese Government had decided to treat Guangdong Province

in a special way, to allow its economy to develop quicker. Several counties bordering on Hong Kong had been designated special areas,

in the hope that this would cause production and incomes to increase

and the differentials with Hong Kong to narrow. Two counties,

Baoan and Zhuhai, had already been designated, and Chaozhou would

follow. These counties would have powers to develop their own foreign

trade.

The Secretary of State for Foreign and Commonwealth Affairs

said that when he had seen the Governor of Hong Kong in London,

and in Hong Kong, the Governor had been full of gratitude for the

reception he had received on his visit to China, and the extent of Chinese economic collaboration with Hong Kong. Lord Carrington had

seen for himself some of the problems caused by the illegal immigrants in Hong Kong. The numbers were very large by Hong Kong

standards, if not by the standards of China, especially when added

to the nearly 70,000 boat people in Hong Kong. Only the Chinese in

Hong Kong could have coped as well as they had.

Sino-British Trade

The Prime Minister asked what assistance the British Government

could give the Chinese Government in the commercial field. The

British Government were ready to supply China with a wide range of

defence equipment, including Harrier. At Prime Minister's Questions

in the House of Commons, she had just been accused of causing trouble

between China and the Soviet Union. When she had responded by

affirming her readiness to supply Harriers to China, to further the

expansion of Sino-British commercial relations, great cheers had

gone up. Pravda had apparently yesterday warned her against this.

She understood that a Chinese delegation would shortly be visiting

Britain. In this field the Chinese Government would be given every

facility and help possible. She wished Premier Hua to know that

this policy came from the top.

CONFIDENTIAL

/ Premier Hua

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