TNAG-0741-FCO40-945-Relations-between-China-and-Hong-Kong-1978 — Page 133

CONFIDENTIAL

DSR 11C

Japanese, with their super-competitive economy, their

geographical proximity, their market for Chinese oil and

raw materials and their political requirement to get on

terms with their large neighbour. There is, however, no

reason why we should not be able to match the performance

of our major West European competitors, and possibly

double or treble our exports over the next few years,

particularly perhaps in the aircraft, mining and steel

industries, and possibly also in electronics and oil

technology. To the extent that we are prepared to sell

would that

arms, we have / advantage over both Germany and Japan,

who are not. We could join with our European partners in

some sales eg the next generation of civil aircraft.

Consultancy services, eg in engineering, are also a

possible field, given the current scarcity of skilled

Chinese personnel.

There will not however be a market in

China for foreign consumer goods.

37. The Chinese have never made any open or even implied

link between civil and military sales. A successful

conclusion to one or more military deals could lead to

certain further related civil exports. It would also

convince the Chinese that the UK was serious in its

intention to become one of their most important Western

trading partners, and would increase their knowledge of

British industry (and vice versa). There could also be

a negative effect if Britain appeared to the Chinese to

be unwilling to discuss military sales. This might make

little difference in the end if all our partners acted

likewise, but could

affect British civil exports

if others were more forward than we over military sales.

138.

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