TNAG-0447-FCO40-512-Future-of-Hong-Kong-1974 — Page 17

one would expect.

Mr Hummel said that Chiang Ch'ing had been dealt some severe blows. Her operas had come under attack. But she had turned this to her advantage. Maybe Mao had authorised these counter- attacks. Mr Wilson said he thought that Chou had been under pressure last year.

Chiang Ch'ing had reasserted her position in January and February. Mao must be behind this to some extent, maybe nudging Chou on internal affairs. Mr Hummel and Mr Wilford both felt that China- watchers in Hong Kong had exaggerated the pressure on Chou. Observers in Peking, where it was possible to get a better feel of the situation, had not stressed this to the same extent.

Mr Youde said that differences of view were natural within any leadership; but he did not feel that they had reached a point within the Chinese leadership which could threaten Chou's position.

7. Mr Hummel said that the ideological debate on self-reliance which had formed part of the anti-Confucius campaign had had no practical effect on trade. Foreign technology continued to be imported in quantity. Mr Evans asked whether the US had offered China credit and whether it was likely that Congress would grant her MFN treatment. Mr Ingersoll replied that China would not admit to accepting credit. But she agreed to extend terms of payment on which she paid interest. This amounted to the same thing. These terms had applied to the biggest deal a $200m Kelloggs contract for ten fertiliser plants. MFN treatment would not help China's trade greatly. Her exports might increase by 10-20%, but this would scarcely affect the balance of trade which was eleven to one in favour of the United States. Nevertheless, the Chinese wanted MFN treatment. Maybe they saw it as an earnest of US intentions. Mr Evans gave a resumé of our trade with China and explained the quota system applied to imports from China. Mr Ingersoll said that it was hard to educate the Chinese in marketing procedures. Chinese labelling and packaging often did not match up to American regulations. Mr Youde thought that this was partly due to a lack of export planning, Mr Wilford said that British inspectors had been to China to check packaging and labelling at least once and had found the Chinese cooperative. Mr Ingersoll said that the Chinese had shown interest in US firms supplying oil drilling equipment. Although they had not ordered any yet, he thought that they would soon do so.

8. Mr Evans outlined the British position on claims against China and asked how the American negotiations were progressing. Mr Ingersoll said that when Mr Rogers had met Chi P'eng-fei in Paris in January 1973, agreement had been reached in principle to trade off private property claims for the Chinese assets blocked in the United States. In November, Dr Kissinger had told the Chinese that papers authorising the distribution of the blocked Chinese assets to designated United States nationals must be signed by the Chinese to satisfy United States legal requirements. In December Mr Bruce had handed over the papers, but the Chinese had not responded. Maybe they were withholding signature as a lever to obtain MFN treatment or maybe internal pressure was preventing signature.

9. Mr Ingersoll asked about the future of Hong Kong. Mr Evans said that if China really wanted Hong Kong back, there was probably nothing that we could do to prevent it. But we were careful to handle problems over Hong Kong as sensitively as possible.

He explained the problems and background of the question of immigration

3

CONFIDENTIAL

/from