TNAG-0741-FCO40-945-Relations-between-China-and-Hong-Kong-1978 — Page 40

CONFIDENTIAL

During the visit of the Chinese Minister for Foreign Trade

to the UK at the end of 1976, he was shown an unclassified demonstration of the aircraft in flight and commented to the Prime Minister that he had enjoyed the demonstration and that the Harrier was a very interesting aircraft.

3. The Chinese are well aware of the requirements for the Governmen

to consult their allies and to use the established machinery of COCOM. &t for this reason the Chinese are reluctant to make a formal approach to the Government until they have a guarantee that the Government will support a particular deal.

the

4. Equally, until we know the extent of the Chinese interest in Harrier it is not really practicable for us to start taking the soundings about likely reactions of our friends and allies to a deal. In particular, we need further indications as to how many aircraft the Chinese are interested in, which versions they want, whether they want to build the aircraft (or parts of it) under licence, muchback-up they require, and over what period they want to bring the aircraft into service.

Commercial and Domestic Implications

how

5. The sale of 200 aircraft would be of great value to

both British Aerospace and to Rolls Royce who supply the Pegasus engines. The total sale might be worth £500 million, or, if spares and support facilities are included, perhaps one billion pounds. The Chinese have traditionally looked

to Britain as their supplier in the field of aerospace; they are at present receiving the last few Trident aircraft and are establishing their own production lines for Rolls Royce Spey engines. A Harrier contract would undoubtedly increase the prospects for further British Aerospace and Rolls Royce sales in other fields. It would also give a boost to China's interest in looking to Britain as a politically attractive and commercially viable trading partner for a wide range of goods. Certainly a refusal to supply Harrier, in the face of a clearly expressed Chinese wish to have it, would set back the prospects for Sino- British Trade Relations.

British

CONFIDENTIAL

/General