The environment:

if China attempted to meet her vast projected energy needs

using coal-fired power stations, the environmental

consequences for the world would be dire.

3. As a result of these concerns, Mr Needham had asked Sir

William Stones, Head of China Light and Power, to advise him on

China's infra- structure needs. The Chinese knew and trusted him

as a man of integrity with no interest in politics.

Once the

Chinese understood our commitment the issue of LEGCO seats would

be seen in perspective. Indeed, there was already evidence that

the Chinese understood this. CITIC had recently abandoned

plans to compete against Hong Kong Telecom (largely owned by

Cable and Wireless) for the new Hong Kong franchise in favour of

an alternative strategy of working with HK Telecom in developing

the Chinese market.

trust.

4. The main objective now was to build

to build up a relationship of

Twelve years ago we had achieved this objective in our

relationship with Japan by setting up a high-level advisory group

that bound us together in economic development. The impact of

this co-operative strategy had been enormous. Now HMG were

seeking to launch a similar initiative in a Chinese context.

Airport impasse was in part a problem of trust.

The

The Chinese

thought it was a British plot to milk Hong Kong for money,

despite much evidence to the contrary. We needed to get across

that our interests were far larger. Our real problem was how to

cope with the huge opportunities and pitfalls of China's

developing economy.

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