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talks in London but suggested that they would be content with a 25% Hong Kong stake and would be prepared to consider a Bank of China guarantee for the loans (i.e. 90% of the total cost of the project). The 25% is of course a requirement of Chinese joint venture law and Li Peng clearly saw some difficulty in obtaining agreement to depart from this.
I shall wish to discuss with CLP how far they can go to meet the 25% requirement particularly now that they are likely to be reliev of the guarantee requirement. The Chinese may, however, be looking for equity participation, even if only a token, from the Hong Kong Government to show commitment to the project.
I think it is clear that no final commitments can be undertaken at the February meetings in either Peking or Hong Kong. Our understanding is that the Chinese-decision making machinery is still pondering the project's feasibility; the financial structu of the project is under study by the client, bankers, government and suppliers alike, and many points remain to be clarified. GEC's position, taking into account the political importance of UK participation in the project, is a further matter for clarification. However, the outcome of the financial and technical talks in February should be such as to allow us to proceed to subsequent Government-to-Government discussions in Peking with a degree of confidence that the project will go ahead and with substantial UK participation.
I hope this gives you enough to consider the issues with your colleagues before we meet in Hong Kong. But if you require
any further information please let me know.
Copies of this letter go to Percy Cradock, John Fretwell and Christian Adams.
A.G. MANZIE
SP. Tibbli
SECRETARY