TNAG-0742-FCO40-946-Relations-between-China-and-Hong-Kong-1978 — Page 83

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also the implications of broadening our relations with China for our relations with our principal allies, particularly the Americans and the major Western European countries and Japan. It is important to remember that we are only one amongst a number of Western nations with whom the Chinese evidently intend to develop commercial and political relations rapidly. The Japanese, for historical and geographical reasons, are well out in front at present and will remain a country of crucial importance to the

Chinese.

4. Defence sales will naturally figure in the discussion but I suggest that it should be regarded as only one factor out of several, important though it is. Mr Dell's visit has shown that we can at least embark on a rapid expansion of Sino-British trade. Sooner or later we shall probably have to sell some defence equipment and related high technology or forfeit the leading positions which Rolls Royce and British Aerospace have won for themselves. Harrier may yet prove to be a key element, but I hope that we can get away from the rather unfortunate symbolic role which it has acquired in the recent discussions about the development of our relations with China.

5. I therefore recommend that we should take advantage of Mr Cradock's presence to concentrate particularly on the practical prospects for developing Sino-British relations and for putting substantial content into them. There is plenty we can do which ought not to involve us in serious difficulty with other countries, allies or not. British and Chinese short-term and medium-term interests coincide in such areas as the development of trade, the future of Hong Kong and the maintenance of stability in Asia. The highly successful visits of senior Chinese to this country and those of Mr Ennals, Mrs Williams and Mr Dell to China show

The framework for that we are operating in a favourable climate. increased trade has been laid and we have a major advantage in dealing with the Chinese that the English language will occupy an increasingly important place in China's plans for educational and technological development.

OONFIDENTIAI

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