TNAG-0029-FCO40-65-Relations-with-China-1968 — Page 63

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HONG KONG TO COMMONWEALTH OFFICE

Telegram No. 383

CONFIDENTIAL

28 March, 1968

Addressed to Commonwealth Office telegram No. 383 of 28 March,

Repeated for information to Peking.

Peking telegram No. 241: Hong Kong.

It is somewhat surprising that the M.F.A. are still dragging the question of rice into discussions. In fact we have gone a long way to meet the Chinese on this.

2. The position is as follows. China Resources Company have been informed on several occasions since 28 February that although the Director of Commerce and Industry is not opposed to this additional quantity of rice (5,000 tons) entering the Colony, he is nevertheless not prepared to risk disruption of the Rice Control Scheme by allowing China Resources Company, who are not (repeat not) a registered importer under this Scheme to bring it in. They have, however, been told that the Director is prepared to license the import of the total amount within a period of two to three months as a non-commercial consignment provided that licences for import are taken out in the names of registered importers. He has made arrangements with three registered importers (who have traditionally handled the import of Chinese rice) whereby no charges would be made for handling the rice. He has also made it clear

(a) that he is prepared to waive the normal storage and distribution charges of the Scheme so that the rice can be distributed forthwith: and

(b) that this transaction would not imply any reduction in the amount of rice which may be imported into Hong Kong from China under normal commercial arrangements.

3. In fact all that would be necessary, if the Chinese really wanted to bring the rice in now, would be for them to make use of the three import licences which are ready for issue (and which the D.C. and I would be prepared to sign at any time on request). They could then distribute the rice through what- ever channels they wish.

i. The basic consideration from our point of view is that if we once create a precedent for the China Resources Company to bring in large quantities of rice as and when it likes, the whole Rice Control Scheme would be undermined. We should risk getting into severe difficulties with other importers, e.g. of Thai rice, who supply the bulk of the requirements of the Colony, and China would be free to undermine the market.

5. The Cia Resources Company are simply being asked to undertake a paper transaction which would involve them in no financial or commercial loss whatever. There seem to be three possible explanations of their failure to comply :-

(a) they really want to undermine the Rice Control

Schone;

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/(b) they

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