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CONFIDENTIAL
Ships
9 Mr Channon referred to the possible order by the China Ocean Shipping Company (COSCO) order for specialised shallow-draught container ships from British Shipbuilders (BS), which the Prime Minister and he had mentioned to Zheng Tuobin. Li Peng said that he had discussed this project with COSCO before coming to the UK and had agreed in principle to consider it. The Chinese shipbuilding industry had been persuaded not to compete (even though it was operating below capacity) in view of the attractive finance available from the UK. So the prospects for co-operation in respect of 2 ships were quite bright provided BS quoted an acceptable price. BS and COSCO should continue their negotiations.
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10 Mr Channon welcomed this news, which he would convey to the Prime Minister.
Telecommunications
11
Mr Channon said that several UK companies were discussing fibre optics projects with China; he hoped that it would soon be possible to implement these. Li Peng agreed and mentioned a project in Shanghai (presumably a reference to the STC project).
UK imports from China
12 Li Peng then referred to the question of UK imports from China and said that how much China could import from Britain depended on how much Britain imported from China. He wondered what products Britain might be interested in importing more of eg low-ash, low sulphur, high calorific value coal though he recognised that Britain is itself a coal producer.
13
Mr Channon replied that HMG recognised China's need to export; the figures showed that the UK had a modest trade surplus with China but nothing like as great as eg the deficit many countries had with Japan. The question of coal imports should best be discussed with Mr Peter Walker, whom Li Peng was to meet at lunch; as for other products, these could be discussed between the Chinese Embassy and the DTI.
Soft Loans
14 Li Peng said that the development loan facility was helpful in promoting UK exports and suggested that the amount should be increased. Mr Channon replied that the development loans had only just been introduced; he agreed that they were a major development of benefit to both sides and the amount allocated could be continually kept under review, but HMG thought that most business must still be on commercial terms.
OT2/3
10
June 1986
CONFIDENTIAL