well received and dispelled previous doubts there about their

capability.

Non-Proliferation

Non-proliferation conditions will also be crucial. The

Ching will not tolerate international inspection of their

nuclear plant. This difficulty appears containable, although lthough

it may be a factor influencing them towards choosing a French

nuclear Island. Recent informal soundings indicate that the

US Administration would be prepared to helpChina on this

matter, but there may be lingering doubts as to the

reliability of the US as a nuclear supplier. Our formal

position is similar to the French in that, since China has

nuclear weapons, we should not seek to insist upon IAEA

safeguards but should seek only assurances that materials will

not be diverted to military use nor re-exported without

prior consultation, and will receive adequate physical

protection.

GEC/Framatome Agreement

8.

Ministers agreed in February, in concert with advice

from Peking and Hong Kong, that to keep Sir Lawrence Kadoorie

well-disposed towards GEC's bid for the Castle Peak 'B'

Station, and to gain a share in the Guangdong station, the

Government should endorse an agreement between GEC and

Framatome to make a joint bid. The French authorities have

now been told and have responded that they see no obstacle to

proceeding, but have not committed themselves formally.

There

is still strong pressure in certain circles to go for an all

French bid.

Nuclear Fuel

4.

The Rench have, in formal discussion, been insistent

that the supply of nuclear fuel- very lucrative business

should be part of the Framatome component: we would like to

/break

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