ENGING VELIKI 190AAA
ABC
PS
CONFIDENTIAL
From:
I C Orr
Far Eastern Department
Date:
23 December 1985
CC:
Dr Wilson
TRED
386
GUANGDONG NUCLEAR PROJECT
1.
In the light of Mr Brittan's minute of 19 December to the Prime Minister and the latest telegrams from Peking (Indus 328 and 329), the Secretary of State may like a report on where things stand.
2.
GEC now face a price gap of £5 million and have been told by DTI that £lm of this might be found by HMG, within the concessionality limit of 25% agreed by Ministers. But the rest will have to come from GEC. (The DTI view, with which I concur, is that the Chinese will insist on the full gap being met).
3. The financial package agreed by the French involved significant concessions on premium, local costs and bank fees. ECGD have not yet been able to calculate exactly how much it would cost to improve the UK offer to match the French (the eventual price agreement will affect the calculations). However this is likely to be about £10m. Immediately after Christmas DTI are likely to seek ministerial agreement for an improved financial package. If GEC can meet the price gap I think it a virtual certainty that a financial concession will be needed to complete the deal.
4.
DTI see no need for messages to the French. We cannot complain at concessions which stem largely from the greater state involvement in the deal on the French side, even if these do raise Chinese expectations from the UK. For instance, the French have dropped their bank fees by 50%. There have been no such fees on the UK side, but the Chinese will nevertheless count this as an improvement in overall financial package, which the UK should match. Any messages to the Chinese would depend on whether we can offer some further financial concessions.
•
Iain culm
rec 166/1
I C Orr
८
Far Eastern Department
CONFIDENTIAL