TNAG-0741-FCO40-945-Relations-between-China-and-Hong-Kong-1978 — Page 126

CONFIDENTIAL

DSR 11C

SECTION II: WHAT DOES CHINA WANT FROM THE UNITED KINGDOM?

25. As noted in Section 1, China is seeking the rapid

modernisation of her economy, and she will need

technology from abroad.' There are a number of possible

sources. As far as other communist countries are

concerned, Sino-Soviet tensions may lessen and practical

cooperation and trade between China and the Soviet Union

and Eastern Europe increase, but the underlying mutual

hostility and fear will remain. The Soviet Union and

the East Europeans will therefore not become major sources

of capital goods and technology, and will certainly not

supply defence equipment in any quantity.

In the United

States, domestic political considerations, historical

perceptions and constraints deriving from American

relationships with Taiwan and China's neighbours will

continue to limit trade, while military sales, at least

of offensive equipment, are likely to remain banned.

This leaves Japan and Western Europe as the main sources

of equipment and technology for China. Although the Sino-

Japanese long term trade agreement will cover about

$10,000 million of plant and construction materials to be

imported between 1978 and 1985, Western Europe will

nevertheless remain an important potential source of

such imports, partly because the Chinese will not wish

to become overly dependent on any one foreign country.

Strategically, China views increased trade as a means of

strengthening Western Europe against the Soviet Union.

Economically, the transfer of advanced technology from

/Western

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