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We shall be preparing a paper setting out the various initiatives already underway or under consideration, as well as areas for potential future development. This will serve the dual purpose of the basis suitably amended of a brief for the Prime Minister's visit and of a basis for future action. I do not therefore propose to cover all the points in your letter in detail at this stage; we shall of course be taking them up inter alia with the Post and the SBTC. It may well be useful to have a meeting at some stage to discuss future action; no doubt there will in any event be briefing meetings for the visit. There are however three matters which I would like to mention now.
I note that among the points which you listed there was no mention of a capital aid allocation for China. Other competing countries (eg Japan, Germany, Italy, Belgium, Canada) make capital aid available to China and this has placed us at a significant competitive disadvantage. (We do of course have a modest technical assistance programme). The Chinese have made it clear that they regard themselves as legitimate candidates for capital aid and have pressed their case on us on a number of occasions. Their commercial decisions are bound to be swayed by the availabi- lity of cheap credit, and whatever their intentions are towards increasing trade with Western Europe the potential for future business with us will be inhibited by the lack of UK capital aid. I am of course aware of the constraints on the Capital Aid Budget and make this point more for the sake of completeness than in any expectation of change.
If a suitable project comes to our notice, we would wish to press a case for ATP for China. However there is, I understand, a general policy ruling to the effect that ATP should not be made available to Communist countries; may we could on FCO support in overturning this policy (if it still exists) in the case of China? However even if we succeed in securing agreement to deploy ATP on a particular project it will not overcome the disadvantage we suffer from the lack of a capital aid programme.
This brings me to the proposal for a Joint Commission. I do not think that there is any justification for re-opening this question. Neither the Embassy nor the SBTC are in favour of it. The BOTB already allocates substantial resources to China (the SBTC receives a larger grant from any other Area Advisory Group and by far the largest per £ of UK export Against the background of staff and budgetary cuts we could not justify allocating the further long term resources which a Joint Commission would require. I do not think any useful purpose would be served by raising the question with the Chinese. Their attitude towards a Joint Commission will be governed by different considerations, prominent among which will be the question of a capital aid programme. Some at least
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