GR 570
SECRET
DESKBY 1609OOZ
FM HONG KONG 160825Z NOV 84
TO IMMEDIATE F C O
SECRET
HKK 040157
RECEIVED 'N REGISTRY
16 NOV 1984
87
TELEGRAM NUMBER 3500 OF 16 NOVEMBER
INFO IMMEDIATE PEKING
DESK OFFICER
INDEX
PA
HONG KONG AGREEMENT
..រ
1. I UNDERSTAND THAT CONSIDERATION IS BEING GIVEN IN LONDON TO
SHOULD WHETHER A PARTY OF BUSINESSMEN, AND IN PARTICULAR FROM GEC, ACCOMPANY THE PRIME MINISTER ON HER VISIT TO SIGN THE HONG KONG
AGREEMENT.
2. AS I HAVE EXPLAINED IN EARLIER TELEGRAMS I CAN WELL UNDERSTAND THAT THE PRIME MINISTER WILL WISH TO TAKE THE OPPORTUNITY OF HER DISCUSSIONS IN PEKING TO PROMOTE SINO/BRITISH RELATIONS GENERALLY AND SINO/BRITISH TRADE IN PARTICULAR. BUT AGAINST THAT HAS TO BE BALANCED THE NEED TO AVOID CREATING THE IMPRESSION HERE THAT THE PROMOTION OF UK COMMERCIAL AND ECONOMIC INTERESTS WAS AN IMPORTANT FACTOR LYING BEHIND HMG'S DETERMINATION TO REACH AN AGREEMENT WITH THE CHINESE ON THE FUTURE OF HONG KONG. TO TAKE A PARTY OF SENIOR UK BUSINESSMEN, WHO WOULD INEVITABLY FEATURE PROMINENTLY IN THE MEDIA COVERAGE RELAYED BACK TO HONG KONG, WOULD IN MY VIEW RUN A SERIOUS RISK OF CREATING THE VERY IMPRESSION WHICH WE HAVE BEEN SUCCESSFUL IN AVOIDING SO FAR.
3. I UNDERSTAND THAT THERE IS ALSO A SUGGESTION THAT THE VISIT SHOULD BE USED TO BRING TO A CONCLUSION OR SIGNATURE SOME ASPECTS OF THE GUANGDONG NUCLEAR PROJECT, EG THE FORMATION OF THE JOINT VENTURE COMPANY. I WOULD RECOMMEND STRONGLY AGAINST PLANNING ON THIS BASIS. IT WOULD INEVITABLY BE INTERPRETED AS USING THE HONG KONG AGREEMENT AS A LEVER TO GAIN THE CONTRACT FOR GEC. AGAIN AS I HAVE SAID IN EARLIER TELEGRAMS THERE IS LITTLE ENTHUSIASM FOR THE PROJECT HERE: E.G. THERE IS ANXIETY ABOUT THE SAFETY ASPECTS: CONCERN THAT THE HONG KONG CONSUMER WILL EVENTUALLY HAVE TO PAY TOO HIGH A PRICE FOR THE ELECTRICITY PRODUCED: AND FEARS ABOUT DELAYS AND COST OVER-RUNS.
4. SECONDLY, IT WOULD BE VERY RISKY TO ASSUME THAT SUFFICIENT PROGRESS ON THE OUTSTANDING ISSUES CAN BE MADE IN ORDER TO BE CERTAIN THAT THE DOCUMENTS COULD BE SIGNED. THE EARLIEST (AND AS YET UNCONFIRMABLE) DATE ON WHICH THE EXECUTIVE COUNCIL CAN CONSIDER THE DRAFT CONTRACTS, WHICH WILL BE ESSENTIAL TO THE AGREEMENT ON OFF-TAKE, AND THE FORMATION OF THE JOINT VENTURE COMPANY, WILL BE DECEMBER 18. GIVEN THE COMPLEXITY OF THE DOCUMENTATION, AND THE IMPORTANCE OF THE ISSUES INVOLVED IT IS AT LEAST POSSIBLE THAT THE EXECUTIVE COUNCIL WILL REQUIRE MORE THAN ONE BITE AT THE CHERRY BEFORE THEY REACH A CONCLUSION: AND THAT IN CONSEQUENCE THE ISSUES WILL NEED TO BE CONSIDERED FURTHER AT A MEETING EARLY IN THE NEW YEAR. THERE WOULD BE STRONG RESENTMENT AMONG EXCO MEMBERS IF IT APPEARED THAT THEY WERE BEING PRESSURED INTO A QUICK DECISION ON MATTERS OF SUCH MAGNITUDE. SUCH PRESSURE WOULD BE COUNTER-
SECRET
/PRODUCTIVE.