CONFIDENTIAL
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because of the Department of Trade's responsibility for the UK Science and Technology Agreement while Mr. Benjamin suggested that Sir Keith Joseph should be the host for Gu Mu.
LEASING INFORMATION NOTE
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Mr Dick asked for comments on this paper which had been circulated some days before the meeting.
26 Mr Palfrey said that the Bank of England's preliminary view was that it had no objection in principle to the leasing ideas proposed in the note but were not sure how credible an alternative they would be to straight credit purchase. The Bank was considering the paper in greater detail and would come back with a fuller critique. Mr Field noted that much of what had been written in the paper had been predicated on ECCD's ability to fund the lease arrangements but the Department felt that it did not yet know enough about leasing to comment author- itatively. However he too shared Mr Palfrey's reservations about its credibility. ECGD had so far studied only one proposal for leasing to China. Over the eight years of the lease period it would cost the Chinese eight million pounds more than a straight credit purchase on a contract price of £50 million. He would be surprised if the Chinese went through with the scheme.
2'7 Mr Benjamin raised the question of whether the Chinese would be prepared to accept leasing as it woudl not give them de jure title to the goods concerned but accepted the Embassy's advice that this was a minor objection that could easily be overcome. The Chinese would after all have de facto title.
28 Mr Dick expressed some disappointment at the progress that had been made on this initiative to date. Although he personally saw a number of potential advantages to the Chinese from leasing as did other senior officials the point of the note was mot to provide a definitive comment on its worth but merely to draw to businessmen's attention an option that they might wish to consider. He therefore asked the Bank of England, ECGD and, in absentia, the Treasury to reply to the technical questions posed by Mr Davies in his letter of 6 June as soon as possible. The Department would then take up Mr Robinson's suggestion that it should approach a small number of potential interested banks and finance houses for their comments after which it would be in a better position to consider what further action should be taken on the initiative.
GUANG DONG PROJECTS
29 Mr Dick reported on his and Mr Benjamin's meeting that morning with Li Jiannan (Vice Governor of Guangdong Province) but noted that this had revealed little new information. He invited Mr Benjamin to report on his experiences on Sir Y K Kan's mission to Guangdong.
30
Mr Benjamin noted that Sir Y K Kan's mission had been to advise the Chinese on how to adopt a more commercial approach in their activities. He was present at discussions on larger projects that could not be handled by Hong Kong companies and took the opportunity to impress on the provincial authorities that Mr Thomson in Hong Kong was the appropriate and well connected route for any approaches to HMG. Turning to particular project opportunities he noted:
Telecommunications:
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This was one of the most promising fields. The Chinese urgently wanted to upgrade their system in Canton city and although what was required was a little more complicated than they appeared to realise a mission led by the GPO would be going out in July. Representatives of STC would also call in Canton on their return from Peking.