CONFIDENTIAL
ACTION
that offer. Mr Hawtin confirmed that Tender-to-Contract cover was not being actively advertised by ECGD because the Bank had run into legal problems; there was, though, nothing to stop GEC from applying for it. The future of the Cost Escalation Scheme was to be considered shortly by Ministers, on the basis of a paper from Secretary of State for Trade proposing its continuation for a further year. Mr Ranson confirmed that ECGD required a 100% guarantee for any ECGD supported loan and that in practice this could only come from the Bank of China. The Hong Kong Government was unlikely to offer to guarantee any portion, and the only other party likely to, China Light and Power, would be unacceptable to ECGD since they already had a very higi exposure on that company.
There was some discussion as to whether the 4% equity held outside China could be deducted, leaving a lead for a 96% guarantee and Mr Ranson conceded that this was considerably better than the 40% uncovered portion previously discussed. Nevertheless 100% was his objective and ways should be considered to persuade the Chinese of this.
There was some discussion as to the form a paper to Ministers might take. Concern was expressed that some of the options contained in Mr Ranson's letter, ie 15 years plus capitalisation, plus locals, would simply be too expensive and it was finally agreed that a draft would be prepared and circulated. Consideration would then be given as to whether it could be submitted for Ministerial approval. The paper should indicate the maximum percentage of subsidy under consideration, allowing officials to negotiate various options within that overall ceiling.
Recent reports indicated that the Chinese were attempting to find out from the French whether the advantageous terms offered by President Giscard were still available. It was agreed that FED/FCO and DOI would jointly draft a telegram to Paris asking whether there was any progress in this area; it would be copied to BTC Hong Kong together with a separate request for information. In parallel, ECGD would raise the matter informally with COFACE. Attention was then given to the visit of Lord Kadoorie and Mr Stones. Westinghouse had already expressed an interest in meeting Lord Kadoorie and giving him a presentation, and it was agreed that Lord Kadoorie would be informed of this, and his views sought. Concern was expressed over the possibility of giving a paper to Mr Stones on the UK's financial position and after discussion it was agreed that nothing detailed would be told to him; we could only refer in general terms to UK competitive- ness and stressed the complexity of the issues involved.
Mr Newton
FED/DOI
ECGD