TNAG-0741-FCO40-945-Relations-between-China-and-Hong-Kong-1978 — Page 152

CONFIDENTIAL

DSR 11C

SECTION VII:

CONCLUSIONS

61.

In the years ahead, two constants in the development

of China are likely to be the emphasis on the speedy

modernisation of the economy, and the continuation, with

some variations of intensity, of the Sino-Soviet split.

China will present the United Kingdom with opportunities

for closer relations and for the expansion of British

exports to China, in the defence as well as civil fields.

To accept these opportunities will bring advantages, in

economic terms and for British political interests.

These include both Hong Kong and the more general

desirability of increasing China's links with the West

and hence her own interest in policies which do not

destroy these links. Accordingly, these opportunities

should be taken up, and contacts with China's leaders

should be maintained.

62.

As part of this general policy, British civil exports

to China should be pursued vigorously. The Chinese,

however, are also interested in buying military technology.

This raises important strategic and political issues for

the United Kingdom and our allies. Strategically, the

only general objection is to sales which directly increase

China's offensive capacity. Politically, the views of the

United States and of other members of COCOM must be taken

into account. The recommended course of action is to

promote arms sales within the limit of what the British

Government believe to be strategically acceptable, to

press for COCOM agreement, and to abide by the result, while

retaining the possibility of going ahead against opposition

with a particularly important sale if we could get away

with it.

CONFIDENTIAL D 107991 400,000 7/76 904 953