TNAG-0616-FCO40-764-Policy-of-UK-on-status-of-Hong-Kong-1977 — Page 69

CONFIDENTIAL

DSR 11C

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 pray Western equipment and

technology in aid. This will offer considerable

opportunities for British industry.

The scale of this

should, however, not be exaggerated given the constraints

on 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 market. But the UK could also

secure a significant share and certainly a better one 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.

35. Against this background, the options, of unrestricted

arms sales and no arms sales to China can both be excluded.

The option which emerges from the above discussion is that

the UK should permit arms sales which arguably do not

· increase Chipa's capability and do not involve classified

or advanced technology which the Chinese would not be able

to develop for themselves.

136.

CONFIDENTIAL

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