TNAG-1157-FCO40-1437-Visits-by-FCO-Ministers-to-Hong-Kong-1982 — Page 113

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conventional island. We understand the French have now offered

Li Peng a package equivalent to this made up of loans at 10%

over 15 years with additional help either for local costs or for

partial capitalisation of pre-commissioning interest. ECGD are

seeking clarification of the details from the French.

6.

Official talks were held with Li Peng on 25-26 November.

It became clear that Chinese were now concentrating on UK/French

package, but that they had been very impressed by French nuclear and French turbine technology and experience. Because of this

they might, but for the importance of Hong Kong participation in

the scheme, be tempted to go for an entirely French package.

1.

HMG made it clear that UK would not be prepared to accept

a subsidiary sub-contracting role in an otherwise all-French

project, (suggested by the Chinese as an alternative to the

earlier Anglo French proposal) and wanted GEC to be awarded the

contract for the whole conventional island. To meet doubts

about lack of British experience GEC prepared to consider a time extension to their normal performance guarantee. In reply to Chinese queries, HMG explained that international obligations ruled out aid to reduce effective interest rate on loans, but

consideration would be given to capitalisation of interest if

conventional island contract given to GEC.

8.

Chinese proposed that further technical discussions with GEC in Peking, and on the off-take agreement in Hong Kong, should be held simultaneously followed by further Government-to-

Government discussions in Peking to draw up a final set of

proposals. They hoped that the Peking and Hong Kong discussions

might take place in late January or early February.

9.

Full details of the talks have been sent to Hong Kong.

The Department of Industry are now considering how best to

proceed, and may send a delegation to Hong Kong to hold preliminary discussions with the Hong Kong Government in advance

of the meetings with the Chinese.

/HONG

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