TNAG-1036-FCO40-1286-Future-of-Hong-Kong-1981 — Page 157

CODE 18-77

CONFIDENTIAL

Table 6: ECGD Commitments to Hong Kong

Section I

Reference

Monetary Limit

£ million

Commitments

£ million

Short term

Extended terms

Specific guarantees

Buyer/Lines of Credit

Sub-total

Section II (National Interest)

No general authority

Total Section I and II

Proportion of total commitments

Source: ECGD

63.3

17.4

500

15.8

131.2

227.7

1,025.0

1,252.7

6.96%

There is room for a considerable expansion of ECGD credit under Section I. There is no limit on a short term business (6 months duration), and further capacity amounting to £335.6 million under buyer credits, extended credits etc. Since Hong Kong has a

'A' credit rating, the highest in ECGD's rating system, there is no reason why cover under Section I should not increase.

15. Projects under Section II are reviewed on a case by case basis and require the final approval of the Treasury.

If the Castle Peak Power Station project goes ahead, it will be met under Section II. Latest information from ECGD indicates that negotiations between the private companies and ECGD are continuing, with ECGD attempting to gain a guarantee on its commitment on phase 'B' from Exxon. It would appear that GEC is the only company to have made a bid to date. The company has recently been asked to submit a formal financial proposal for the generating units and it seems likely that a contract will be signed sometime in 1981.

16. There has been no formal discussion of export credit policy to Hong Kong, other than in relation to the implications of the power station project. It is therefore not possible to say what ECGD's attitude to future requests for buyer credits under Section II might be if the power station project goes ahead. The latter would nearly double ECGD's commitments in the one market. But it is highly unlikely that another project of this scale would need to be financed in the next few years. Thus attitudes towards future commitments in Hong Kong under Section II may simply follow normal proceduresie the extent to which a project is considered to be in the national interest and Treasury willingness to meet the cost of the interest rate subsidy.

CONFIDENTIAL

/China's

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