CONFIDENTIAL
THIS IS A COPY THE ORIGINAL HAS BEEN CLOSED UNDER
FOI EXEMPTION NO. 271)
17. Trade continues to expand. In 1985, British exports will havebeen worth about E400 million (up 27% on 1984) and Chinese exports about 300 million. But the United Kingdom, with a market share of about 2%, still lags far behind Japan, the United States and Hong Kong as a supplier and quite a long way behind West Germany. British businessmen still need to show more stamina in this market, which is now worth over $30 billion and is growing fast.
18. The commercial event of the year was the signature on 31 December of a price agreement by the General Electric Company (GEC) about the supply of equipment for the Daya Bay nuclear power station in Guangdong Province. this should lead later in 1986 to the conclusion of a contract
worth about E250 million.
19. In October, we told the Chinese that the British Govern-
ment was willing to support a soft-loan facility of E100 million. In December, Lord Young said that this money could be followed by more. This pathbreaking step has undoubtedly pleased the Chinese. I do not think it will lead to the
crowding out of business on normal commercial terms. A possibility which I hope will be studied seriously is that at least some of the money available should be associated in cofinancing arrangements with World Bank lending to China.
20.
More work was done on the legal framework for trade and investment. A Nuclear Cooperation Agreement and an Economic Cooperation Agreement were negotiated and signed. Work on an Investment Promotion and Protection Agreement was almost rounded off.
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21. Four trade-related missions led by Cabinet Ministers
visited China. Lord Young came here in February and December; Mr Ridley in September; and Mr Jopling in November. The format of associating a group of senior businessmen with a Minister during quite a long visit worked well; and I am strongly in favour of its continued
use.
22.
Doing business in China remains difficult. So does
investment in China. There are still only about a dozen Sino-British joint ventures and most of these have generated problems. I would certainly not advise British companies to rush to invest in China. Many, especially among the newcomers would be wise to concentrate for the time being on simpler forms of activity, including technology transfer and technical training. On joint ventures, I suspect that the looser form (the contractual joint venture) is less likely to give trouble than the stricter form (the equity joint venture).
23. Cultural, educational and technological exchanges (many under our Technical Cooperation programme) developed well. There are now about 2000 Chinese students, engineers and
technicians, in the United Kingdom. There are about 150 British teachers of English in China and about 110 students. Towards the end of the year, Sir Y K Pao proposed that the British Government, the Chinese Government and he himself
should contribute a total of $50 million to a fund for the
education of Chinese students in the United Kingdom over a period of ten years. Both the British and the Chinese Governments have welcomed his scheme in principle. When launched, the numbers of Chinese students in the United Kingdom will probably exceed the numbers in France and Germany, for the first time in recent years.
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24. After a break of eighteen years, we reopened for official business in Shanghai. Mr Trevor Mound's Consulate General is a small post. But it is already in the thick of things and it is good that the flag should fly again in the city which British enterprise did so
much to build.
25. 1986 will be a big year in Sino-British relations. In June, Hu Yaobang, the General Secretary of the Chinese
Communist Party, will visit the United Kingdom at the
invitation of the Prime Minister. In October, Her Majesty The Queen will pay a State Visit to China at the invitation of President Li Xiannian. These two events would have been inconceivable ten, or even five, years ago.
26. I am sending copies of this despatch to the Governor of Hong Kong, Her Majesty's Ambassadors in Washington, Moscow and Tokyo, the United Kingdom Permanent Represent- ative on the North Atlantic Council and Her Majesty's Consul-General in Shanghai.
I am,
Sir,
Yours faithfully.
Richard Frans
RICHARD EVANS
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