TNAG-0616-FCO40-764-Policy-of-UK-on-status-of-Hong-Kong-1977 — Page 35

CONFIDENTIAL

DSR 11C

33.

British firms involved in sales of defence

technology to China might also in certain circumstances

incur difficulties with US customers or component

suppliers. This would generally apply only in cases

which were "swing" cases in a COCOM context. Much would

depend on the attitude of the US Administration.

In

general, the British firms concerned are as well placed

as anybody to weigh the balance of commercial advantage.

SECTION V:

OPTIONS AND CONCLUSIONS FOR ARMS SALES

AND CIVIL SALES

34. Over the next twenty years, China will be preoccupied

with her internal industrial development. Under her new

leaders, she wishes to modernise her backward industry

and defence capability, and plans to seek Western equipment

and technology. This will offer considerable

opportunities for British industry. The scale of this

should, however, not be exaggerated, given the constraints

of China's foreign currency earnings, her unwillingness

to accept long-term credit (although the credit picture

may change) and the fact that Japan will continue to

get the lion's share of the Chinese civil market. But

the UK could also secure a significant share, and

certainly a better ore than she now does, both in the

civil and particularly in the military field, in which

France is likely to be our only major competitor.

CONFIDENTIAL

135.

D 107991 400,000 7/76 904 953