CONFIDENTIAL
HKD
ET MON
10 DOWNING STREET
2010/2
RECVLD
From the Private Secretary
es/ur benton
PS/PUS
fir w
Handis
Br wiban
(37.
urmarginea (personal
copy)
10 June 1986
سلا
H.......
DEX
lony,
13 JUN 1986
Ce Pesonal
PA
сожи
1.6.
Hay King
E.R.
6
Paling.
1 Sati
o Leal
C.
PRIME MINISTER'S MEETING WITH SIR Y. K. PAO
The Prime Minister saw Sir Y. K. Pao this morning, together with his daughter, Mrs. Anna Sohmen.
RM
The Prime Minister thanked Sir Y. K. Pao warmly for the initiative he had taken to set up the Sino-British Friendship Scholarship Scheme and the speed with which he had brought negotiations to a positive conclusion. thought it an excellent and far-sighted scheme.
She
Sir Y. K. Pao said that the dinner for Hu Yaobang the previous evening had clearly been a great success. Hu Yaobang was in excellent form. It was important to have close contacts with him. He was the one member of the Chinese leadership who travelled all round China, and was known to everyone. In his personal view, Hu Yaobang was likely to take over the chairmanship of the Military Commission from Deng Xiaoping next year. He thought Hu Yaobang was also likely to visit the United States fairly soon, probably in early 1987. In general, Hu Yaobang had calmed down quite a bit since his early forays into international diplomacy and was now a rather more dignified figure.
Sir Y. K. Pao said that he had had some discussion with members of the Chinese delegation about the Ningpo steel mill and would be having further contacts later today. The main problem was over price: the Chinese were used to Japanese prices which were significantly lower than European levels. It would also be necessary to provide soft loans. Hu Yaobang had told him that purchases from the Ningpo steel mill would be guaranteed for thirty years. He still hoped for an announcement of a decision to go ahead with the project during The Queen's visit to China in October. In response to the Prime Minister's question, Sir Y. K. Pao said that soft loans might be needed to cover about a quarter of the total cost of the project, that is, $1 billion. The Prime Minister said that she was not confident that negotiations would proceed rapidly enough to allow any decision to be announced by October. Nor did she think it practicable to think in terms of soft loans on the
CONFIDENTIAL