TNAG-0769-FCO40-973-Supplies-of-electrical-power-for-Hong-Kong-Castle-Peak-power-1978 — Page 27

HM Treasury

HKE 164!!

RALEIVED THE REGISTRY NO. Di

Parliament Street London SW1P 3AG OFFIC

Direct Line 01-233 5015

Switchboard 01-233 3000

INDEX

No

198

REY Action Taken

Our ref: AEF3 17/68/01C

DH Twyford Esq

Export Credits Guarantee Department

Aldermanbury House

Aldermanbury

London EC2P 2EL

Dear Donald

HONG KONG: SECTION 2 COVER

16 November 1978

С.С. HRGD

My attention has been drawn to the recent exchange of correspondence about the transmission line contract which recalls my unease earlier this year about the substantial exposure in this market generally, and in particular your liability in respect of the public utility CLP Group of companies.

In general conversation with Malcolm Stephens on this market he drew my attention to his letter of 11 October to the Department of Industry, which sets out very clearly the reasons for concern about the security for those contracts held by the CLP Group. Given this burden it is worrying that there is now some over-heating in the economy with a slackening in growth rate, largely attributable to protectionism by Hong Kong's major textile importers. It is most unlikely that the growth rates enjoyed since the 1960's will be achieved again, unless Hong Kong is able to diversify its economy. A trade deficit equivalent to £490 million in the first half of this year is of particular concern.

Given the warning signs I felt it essential that we should all take note of the need to look very carefully indeed 'at any future sizeable contracts that may come along. This is particularly so in respect of any further liabilities in relation to power generating and distribution

Yours sincerely Joan Kelley

MISS J KELLEY

cc D Shilson

B/E

J Ayres

FCO

P Twyman

DOT

M D Oldham

DOI

J Gill

ECGD

NE Hoult

ODM

M Hodgkiss

DOT

AC Hutton

DOT

J W Davey

MOD

M Stephens

ECGD

S N Chilton

DOI