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SIR Y K PAO'S CALL ON THE PRIME MINISTER, 21 MARCH
NINGBO STEEL PROJECT
Background
1. Sir Y K Pao, a native of Ningbo, introduced this project (total cost £4 billion; maximum UK content £2 billion) to the Prime Minister in November 1984. The estimated cost has risen substantially since the project was first put forward.
2. Davy McKee have formed a consortium to pursue the project and are undertaking a feasibility study with DTI support. First stage of study was presented to Chinese Ministry of Metallurgy on 3 March. It is hoped that Chinese will authorise consortium to proceed with main study within 2 months or so.
3. Chinese have made clear that financing terms will be crucial. Project is so big that at most a small part of it (eg blast furnaces) might be considered for funding under the recently established £300m UK soft loan facility. The Davy Consortium are considering introducing European partners to share the financing burden.
4. On 4 February, Sir Y K Pao told our Senior Trade Commissioner in Hong Kong that he hoped to see agreement on this project in time for The Queen's visit to China in October; but the scale and complexity are such that this is unlikely.
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