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6
There is as yet no certainty as to how the Chinese will
proceed to select suppliers. On several occasions they said they
wished to hold a competition, and it is known that the French
visited Guangzhou the week after the UK delegation left. The
Chinese tactics seem to be to assess the value of each country's
financial package before holding detailed talks with hardware
manufacturers. If the finance package is acceptable, and if UK
hardware prices are competitive, there appears to be at least
some hope of a negotiated contract, rather than open international
tendering. At one stage of the discussions the senior Vice Governor
said that the choice might in the end be between Westinghouse/GEC
and Framatome/GEC. (The French have in fact now sought a meeting
with my officials on 6 August to talk further about the project).
Continuation Sheet No.
2
7
My officials consider that a competitive financial package
is the most important factor at present. The Chinese pressed hard
for a rate of interest on the ECGD loans below the current Consensus
level, for capitalisation of interest on the loans and the inclusion
of aid in the package in some form.
8
The UK side also pressed a number of important points related
to financing, including the need for a 100% Bank of China guarantee
for foreign loans, the ownership of the equity of the operating
company, and the associated liabilities.
9
To reinforce the point that the Chinese consider aid to be
a key to British participation, in a private communication just
received, the Secretary General to the Provincial Government has
indicated that the problems related to the liabilities consequent
on equity holdings by foreign interests could be resolved if the
UK were to show its good intent by including aid. I also understand
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