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seriously undermined. Shajiao C was one of only two energy projects on the list handed over by the Prime Minister during his visit to China. Having sought to influence the Chinese at the highest political level it would be difficult now to justify failing even to indicate full ECGD support.
There could be serious consequences for UK manufacturers of power generating equipment if buyers in China and Hong Kong were to begin to lose confidence in the UK as a supplier of such equipment. The UK arm of GECA is currently attempting to convince its French counterparts that Britain can continue to compete effectively for major projects in traditional markets. The last order for a thermal power station for the UK arm of GECA was for the Yue Yang power station in China in 1988 and a failure to indicate ECGD support on a realistic basis for Shajiao C would add momentum to calls to increase the French manufacturing bias in the company.
My Secretary of State is very concerned that Nicholas Holgate's letter seems to sweep to one side or effectively ignore all the key PMS controls and to substitute for these irrelevant misleading historical analogies.
The facts are quite clear:
(i)
(ii)
Both of these cases can be fitted within the Market Exposure Controls for China and Hong Kong which have been set according to PMS procedures and approved by ECGD's Advisory Council.
Either or both cases can be taken within the Amber Zone budget. The PMS does not provide for any maximum part of this budget to be allocated to particular countries.
(iii)
The risks, as set by PMS ratios, are not unacceptable.
(iv)
(v)
Full PMS premium rates would be charged.
Indications only are required at this stage and indications do not imply any commitment to provide cover at a later stage.
The Chief Secretary has expressed concern that should both these projects require the commitment of ECGD cover in this financial year, this would exhaust the unused balance of the Amber Zone Budget (AZB). This is misleading since the information we have on timing of these projects suggests that
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