TNAG-0637-FCO40-785-Supplies-of-electricity-for-Hong-Kong-1977 — Page 27

file 5860. CONVENITAL Gpied

RECEIVED IN

20 JUL 1577

Office of the Minister of brace

From the Private Secretary

Dear John,

to Mester 5.331/7

For information Mi Macdonald

a PS/SOTS

Ps/ &cretary Mir Bullock

10 DOWNING STREET

Hong Kong Power Station Project

26 July 1977

Mr Lippitt Mr Clark. Miss. Michler

Thank you for your letter of 25 July to David Holt, with which you enclosed a brief for the Prime Minister's meeting this morning with Sir Lawrence Kadoorie.

Sir Lawrence Kadoorie duly called on the Prime Minister at 0930 today. Sir Lawrence said that he welcomed this opportunity of bringing the Prime Minister up to date on the Hong Kong power station project. He was convinced that the proposal for a package deal could put the United Kingdom back into a premier position among China's trading partners. The Chinese were, in general, now more open to the idea of negotiating with the West. The Japanese were also making great efforts; but, at the very least, there was no hostility towards the UK on the part of the Chinese authorities.

He

Sir Lawrence Kadoorie went on to say that the question of coal supplies from China should not be underestimated. had learned that the Japanese were about to send a high-powered delegation to Peking. The Japanese had received a proposal from China for the export to Japan, as from 1985, of 50 million tons of oil and 5 million tons of coal annually in exchange for steel products and fertilisers. The Chinese had also expressed interest in the purchase of port facilities, transport- ation equipment and coal mining machinery. Sir Lawrence said that he was calling on Sir Derek Ezra on 2 August to discuss these aspects. He had heard doubts expressed as to whether Japan could absorb this quantity of oil. The Prime Minister suggested that Japan could always switch from her Middle East sources of supply. Sir Lawrence agreed and said that he thought that by 1985 China would be able to export 50 million tons of cil p.a.

The Prime Minister told Sir Lawrence Kadoorie that the British Ambassador in Peking was taking an active part in exploration of the deal. Was Sir Lawrence aware of his activities? Sir Lawrence Kadoorie said that he was. He and Mr. Duncan of Esso had received an encouraging reaction to their approach to China Resources on 5 May. For some time they had received no reply to their approach but they had now heard from China Resources that the authorities in Peking would find it difficult to cater for CLP/PEPCO's requirements on the

/timescale