VUNE JDENNA ALLAN
Original at: AKK 164/1
!
This Copy for:
r Williamson
Mr Clift
Information only / Action on Para(s)
ECGD COVER FOR HONG KONG PROJECTS
1
18
HKK 164/1
NKK
172/1
„¿CEIVED IN REGISTRY NO. 51
2 4 SEP 1980
DESK OFFICER
INDEX
No
PA
магида
REGISTRY Action Taken
Awadd
MS 1. You asked for a brief for the DOI meeting on ECGD involvement in Hong Kong.
2. There is no reason for ECGD to be concerned about the future of Hong Kong after 1997. Chinese leaders believe it is too early for detailed discussions on this subject, but Deng Xiaoping and Gu Mu have made general statements about maintaining the status quo and the prosperity of Hong Kong. (China earns between one- third and one-half of her foreign exchange through Hong Kong.)
3. It is important that HMG display no unease about the future of Hong Kong, as this would lessen business confidence in the territory, and have serious effects on the economy. Therefore any doubts on this point should be classified Confidential or above.
4.
Hong Kong's economic future looks good despite the world recession. Its position in Asia is favourable as much trade with the PRC is routed through Hong Kong. Also it is a major financial centre in SE Asia. The territory's ability to adapt to changing economic conditions is shown by the continuing growth in real terms of its foreign trade and Gross Lomestic Froduct. It is predicted that the economy will continue to grow despite recession[ elsewhere. Thus, the outlook is favourable for ECGD to provide cover for large export orders.
5. With reference to security for Castle Peak 'B' power station:
(a) It is unlikely that the shareholders of CLP and Esso would
wish to provide a full guarantee; any such guarantee would also mean an increased charge to the consumer.
(b) Mortgages or charges on overall existing generating capacity
would be impossible for the companies to accept.
(c) The Hong Kong Government is unable to act as guarantor and
regards such a guarantee as unnecessary given CLP's monopoly position and the continued growth of the economy.
CLP
(d) CLP could not give an undertaking not to buy current from
Guangdong. (In any case, the Guangdong project is valuable to the UK in terms of export orders and prestige.) envisage meeting their base load from Guangdong and using their Hong Kong facilities for covering peak demand.
6. In view of these factors, it is suggested that there should be discussions with the Hong Kong Government on more practical proposals.
7.
Over-stringent demands for security might result in the loss of contracts. The power station contract is not finalised and it
CONFIDENTIAL
/i8