From the Private Secretary
SECRET AND PERSONAL.
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10 DOWNING STREET
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Mr Donand
18 December 1981
Mr ElliGH FED
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Dow Throne,
Prime Minister's Meeting with Sir Y.K. Pao:
17 December
Herz 026/18
53
1981
Thank you for your letters of 16 and 17 December.
On his arrival Sir Y.K. Pao requested that his meeting with the Prime Minister should be private. After the meeting the Prime Minister gave me an account of what had transpired but she is most anxious that the conversation should be fully protected. I should therefore be grateful if this letter is shown only to those who really need to know its contents.
11
Sir Y.K. said that he had had a long talk with Mr. Gu Mu,
He had also Deputy Premier of China, and also with Deng Xiaoping. seen Huang Hua.
Gu Mu said that he had never been to the United Kingdom. Sir Y.K. wondered whether it would be possible to invite him here, perhaps in February. He had said that the Chinese were very concerned
They had implied about their relationship with the United States. that if the Americans .moved closer to Taiwan and in particular developed a significant relationship in the arms field, this would
The latter therefore wished be too much for the Chinese to digest.
But Deng Xiaoping had questioned to get nearer to the United Kingdom. the desirability of this on the grounds that the UK was too poor to help. Sir Y.K. argued that British economic policy was working and there were ways in which Britain could be helpful to China.
The subject of Hong Kong had arisen in these conversations. Sir Y.K. thought it desirable that there should be early high level
In this connection discussions with the Chinese about the matter.
the Chinese had drawn attention to the ways in which Japan was helping China at present. They had apparently produced both substantial export credits and an untied loan equivalent to $1 billio in value. He had been asked by the Chinese whether Britain would
The Chinese would consider providing a similar kind of assistance.
They were not making a then be happy to discuss Hong Kong.
SECRET AND PERSONAL
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