TNAG-0638-FCO40-786-Supplies-of-electricity-for-Hong-Kong-1977 — Page 144

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There were mixed feelings about the soundness of Sir Lawrence's suggestion. There was a clear political advantage for Hong Kong to seek stronger commercial links with China and Mr Macdonald confirmed his own view that this factor was uppermost in Sir Lawrence Kadoorie's mind. Sir Lawrence had said that CLP would not be seeking to make any profit on the sale of mining machinery via Hong Kong, but a link with China would make it easier to sell to his Board the idea of a negotiated contract with the UK power plant industry. The wider implications were difficult to predict however; the Hong Kong route for UK exports to China might arouse the natural Chinese suspicion of trade conducted through middlemen. On the other hand, the Chinese might find the method attractive as a means of saving foreign exchange. They would probably also welcome the chance of deferred payment terms but this could rebound to the UK's disadvantage in other future export deals with China.

iii Mr Macdonald said that he felt sure that the UK power

station proposals would stand or fall on their own merits. Not only did they offer commercial benefits for CLP/PEPCO but also there were wider political advantages for the Hong Kong Government which might be pleased to see the Hong Kong dollar achieve the status of an internationally acceptable financial medium. It was agreed that in view of this and of the possibility of direct sales of mining machinery to China, HMG's priorities should be to win the Hong Kong power station contract without additional complications and to pursue mining machinery exports to China on commercial terms which it was felt could· be achieved without jeopardising China/Hong Kong relations. In view of the fact that CLP/PEPCO had already approached China Resources in Hong Kong, however, it was also agreed that Derek March at the BTC Hong Kong 'should be asked to sound out Sir Lawrence as to how he envisaged the financial mechanism of a deal involving UK exports to China via CLP.

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iv It was agreed that these priorities would be reflected

in the line to be taken by DoI in the event of a meeting between the Secretary of State and the Chinese Minister of Trade during the latter's forthcoming visit to the UK.

IC2

14 November 1977

cc: those present

Mr Lippitt

Ir Havelock EPT

Mr March BTC Hong Kong

Mr Davis Counsellor Commercial Peking