TNAG-1034-FCO40-1284-Visits-by-non-officials-from-Hong-Kong-to-the-UK-1981 — Page 16

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THAT HE COULD NOT SWALLOW' DELIVERY OF FX FIGHTERS. HE THEN QUESTIONED PAO ABOUT THE POLITICAL SITUATION IN THE UK AND PAQ DESCRIBED THE PRESSURE OF UNEMPLOYMENT ON THE GOVERNMENT AND THEIR

NEED OF ECONOMIC PROGRESS OVER THE NEXT 12 OR 18 MONTHS. DENG THEN MENTIONED THE POSSIBILITY OF PLACING LARGE ORDERS FOR COAL-MINING AND OTHER MACHINERY IN THE UK. PAO THENBROUGHT UP THE

QUESTION OF HONG KONG.

9. PAO TOLD ME HE RECEIVED THE IMPRESSION THAT IN REPLY DENG WAS INDICATING THAT HE WAS DISENCHANTED WITH THE US EXCHANGE FOR DEVELOPMENT, WOULD LIKE A CLOSER RELATIONSHIP WITH THE

NEEDED FOREIGN UK AND IN THE PROCESS CONCEIVABLY HELP THE UK GOVERNMENT WITH EXPORT ORDERS WHICH MIGHT BE ASSISTED WITH A LOAN, AND THAT ALL THIS MIGHT ASSIST A SOLUTION OF THE PROBLEM OF HONG KONG.

13. PAO SAID THE REFERENCE TO THE AMERICANS AND TAIWAN AND THE WISH TO DEVELOP TRADE WITH THE UK WERE SPECIFIC, BUT THE LINKAGE WITH HK WAS ONLY HINTED AT, BUT HE BELIEVED THE INFERENCE

TO BE THERE AND THAT DENG EXPECTED HIM TO PASS ON THE WHOLE PACKAGE TO THE PRIME MINISTER THOUGH AGAIN HE SAID THIS WAS NOT SPECIFICALLLY REQUESTED.

11. IT IS NOT EASY TO MAKE OUT EXACTLY WHAT PAO IS SAYING, MOREOVER

HE MIXES FACT WITH DEDUCTION, AND HE CAN BE MISLED BY HIS AMBITION. NEVERTHELESS, WHATEVER MAY OR MAY NOT HAVE BEEN HINTED OVER HONG KONG, PAO BELIEVES THE CHINESE MAY BE READY TO CONSIDER SOME MAJOR TRADE DEAL WITH THE UK PROVIDED FINANCE IS OFFERED AND

THAT THE OBJECT IS POLITICAL AS WELL AS ECONOMIC. PERHAPS MR REES MAY BE ABLE TO SHED MORE LIGHT ON ALL THIS.

12. MEANWHILE THIS TELEGRAM IS TO FOREWARN YOU AS PAO WILL NOW JOIN GU IN TOKYO AND THEN FLY TO LONDON WHERE I GATHER HE MAY SEE THE P M. AS PAO MADE A GREAT DEAL OF CONFIDENTIALITY I HAVE ADDRESSED THIS TO YOU PERSONALLY.

.

13. HE OBSERVED TO ME THAT IF DENG REALLY WAS THINKING OF SOME POLITICO/TRADE PACKAGE WITH THE UK THAT MIGHT INCLUDE OR BE BROUGHT TO INCLUDE, HONG KONG, WE MUST MOVE VERY CAUTIOUSLY INDEED.

WITH THE LATTER SENTIMENT AT LEAST I HEARTILY CONCUR.

MACLEHOSE

LIMITED HK rGD FED

SIR E YOUDE MR DONALD

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