TNAG-0949-FCO40-1168-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 61

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Commercial and Financial Implication of the Guangdong Project

7. While the UK is not in a position to supply a PWR (the reactor

type preferred by the Chinese), it has been established in discussions

subject to the terms being reasonably

that UK industry will be asked

competitive

--

to provide the non-nuclear equipment with another

supplier providing the nuclear island.

8.

From recent discussions it appears that the PRC may look for the

following HMG/Hong Kong Government involvement in the project:

(a) an equity holding in the Hong Kong Company to be set up as joint

owner with the PRC of the operating company which will run the

nuclear station;

(b) the assumption of some liability in respect of possible damage

arising from any nuclear incident;

(c) generous export credit support for the foreign loan element of

the project finance. (Sir Lawrence Kadoorie claims that the

French have offered 85% at 3%, with the remaining 15% interest

free.)

It is not clear to what extent this represents actual Chinese expect-

ations. In discussions with Sir Lawrence Kadoorie, it will be

necessary to steer a line between on the one hand appearing to be

less than enthusiastic about the project, and on the other seeming

to give financial undertakings which might go beyond what the Chinese

would be prepared to settle for and what we might reasonably be

expected to offer, which would substantially reduce the value of the

project to the UK, and which might involve liability for potentially

huge damage by a reactor not supplied by the UK and over whose oper-

ation we would have no control.

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