TNAG-0950-FCO40-1169-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 158

(7)

CONFIDENTIAL

•

repayable over 10 years the amount of interest on which the interest make up subsidy would be payable would be of the order of US $562m; over 12 years this would rise to US $627m and over 15 years to US $726m.

18

Should the Chinese insist on support for the capitalisation of pre-commissioning interest, and this be conceded, assuming an 8 year pre-commissioning period a rough estimate of the additional interest which would attract the interest make up subsidy is:

10 years US $115m

12 years US $137m

15 years US $170m

These figures are essentially speculative.

-

No firm figures can

· be provided until a detailed loan schedule is available.

19

The actual cost of the interest make up cannot be calculated in advance, especially as it depends on the difference in interest rates, but supposing a make up of 4% on a US $ loan then the cost of the subsidy would be of the order shown below:

-

Normal Cost

10 years £290m

12 years £324m

15 years £375m

Extra Cost if Pre- Commissioning is Capitalised

£59m

£71m

£88m

The loan would be made to the PRC, as the majority owners rather than Hong Kong. This would give a preferential rate of interest

and not increase ECGD's already high exposure in Hong Kong notably

to China Light and Power.

20

In March, 1979 the then Secretary of State for Industry indicated to the Minister of Foreign Trade the willingness of the UK to support credit facilities for China up to an amount of US $5bn over a period up to 31 March 1985. The proposed credit for the Guangdong project could be comfortably accommodated within that

· figure.

-6-

CONFIDENTIAL