CONFIDENTIAL
6. Sectors.
It was agreed that the Prime Minister should be briefed to stress British technology and expertise specif- ically in the sectors of coal, off-shore oil and thermal power.
7.
Aid. It was generally agreed that there was now a case for considering a major increase in aid for China. On capital aid, Mr Baxter said that £10m or more would be necessary to have any impact. A bid for such an amount, spread over two years, against the unallocated reserve might succeed; but it was for the Diplomatic Wing to decide on geographical priorities. Mr Benjamin felt that £10m would appear derisory in the face of much larger programmes from the Japanese and others. We would get more out of a programme of £20m, spent not as pure aid but in mixed financing. At 50% concessionality, this could then give £40m of coverage. Mr Baxter said that mixed finance could only be provided under ATP. It was noted that ECGD had agreed that the gentlemen's agreement on mixed credit for China had now collapsed; but that the Treasury was still opposed to ATP for China. On the relative merits of technical cooperation and capital aid, Mr Baxter said that both could be helpful. Capital aid could be absorbed quickly on particular projects. Technical cooperation was more labour intensive and took longer to bear fruit; but the benefits were often higher in the end. It was agreed that Dr Wilson would minute quickly to Mr Vereker, copied to DTI, with a bid for £15-20m over 2 years. The minute would simply say it was for consideration whether this should be provided as capital aid or under ATP; it would then be for ODA and DTI to decide on this.
8.
As regards the Prime Minister's visit, it was agreed that briefing should include an account of the position on aid, with a defensive line. But the Prime Minister should not raise it. Mr Benjamin considered that, if a positive decision were achieved, the Chinese might best be informed during the subsequent trade mission. It might however be helpful for the Prime Minister to make the general point, for instance in connection with the Kailuan coal project, that we would try to provide attractive financial packages.
9. ECGD rating. It was agreed that it would be helpful if the Prime Minister could inform the Chinese that they had been upgraded. DTI would seek ECGD agreement to this.
10. COCOM etc. It was agreed that the brief should contain background and a defensive line on COCOM, and background on China and the GATT (within the Hong Kong briefing) and on quota problems in EC/China trade.
11. Joint Commission. The arguments for and against a Joint Commission with China were discussed. Mr Cruickshank said that DTI, as the Department which would have to bear the burden, remained convinced that the extra expenditure and effort required were not justified. It was agreed not to brief the Prime Minister to raise the subject specifically; but she should ask the Chinese what in their view could be done to improve trade.
CONFIDENTIAL
/12.