RGUMENTS
(a) (i) Synopsis of world political scene: post Tokyo Economic summit; Chernobyl; terrorism; prospects for a Reagan/Gorbachev
summit; arms control.
(ii) Concern about protectionist threat; Japanese trade surpluses; must use falls in oil prices, interest rates, value of dollar and inflation to boost world trade and economic growth; new GATT round.
(iii) British economy in good shape, technologically in first rank, coping with lower prices for North Sea oil, successful in compet-
itive world markets, especially Europe.
(b) Anxious to cooperate further with Chinese and believe we have much to offer. Since last met have signed agreement on development loans, investment promotion and protection and (now) student scholar- ships. All designed to help China modernise and expand economic-
ally.
Relaxation of COCOM rules, defence sales.
(c)(i) Hong Kong, most obvious area of us working together success- fully. Much achieved in first year: UK firmly committed to making success of Joint Declaration. Joint Liaison Group (JLG) has made good start. Success important for the confidence necessary to maintain stability and prosperity. But confidence fragile; must
work hard together to sustain.
(ii) Importance of continuing signs of cooperation and goodwill. The Queen's State Visit to China followed by visit to Hong Kong. Y K Pao's idea for scholarships. Daya Bay/Guangdong power gener- ation project. Reassurance to public on safety standards (important post-Chernobyl). £300m development loans.
(d)(i) Need to resolve last outstanding bilateral problems. Hope next round of claims negotiations in London can be very soon. Issue that should be ripe for settlement. Have solved harder problems. A minor barrier to development of fullest economic and commercial
relations.
(ii) BA keen to resume carriage of traffic between Hong Kong and
Peking.