TNAG-1166-FCO40-1446-Future-of-Hong-Kong-1982 — Page 33

2.9/1 M. Art Quade

Mr. Willian foo

CONFIDENTIAL

An dengan?

29/

Mr Manning (APD, L 503)

4/2

cc: Mr Donald

Mr Bayne (ERD)

Mr Burton (SAD)

Mr Mallaby (Planning Staff) Mr McLean (TRED)

Mr Clift (HKGD)

Mr Muir (OT 4, DOT)

AID TO INDIA AND CHINA

1.

NR

I have seen copies of telegrams about India and the IDA (notably telno MODEV 11 to Delhi, which caused us to ask for the papers) and a copy of the brief on aid prepared for Mr Hurd's visit to India earlier this month. Both bear on the consequences for India of China's accession to the World Bank family, and I am a little concerned that FED has not been brought into the discussions earlier. We must be careful that any assurances we give to India now do not tie our hands for the future and prevent our giving China in due course the share of the cake to which she is fairly entitled.

2.

I understand that it was agreed when China joined the World Bank that she would not be a beneficiary of the current IDA phase. But I do not think we can simply leave the question of China on one side until we start to negotiate IDA 7; we should already be considering how we are to respond to the emergence of another aid-hungry giant.

3.

NR

I attach a copy of a letter of 9 November to me from Mr Atkinson in Peking. By way of prologue to a serious study of the proposals he makes we have been discussing some of the implications with the Department of Trade, who have been considering the particular case of Pilkingtons' negotiations with the Chinese. I should however now like to ask the Departments concerned to consider a general review of our policy on aid to China, bilateral and multilateral. (On the latter, it occurs to us that there may perhaps be some advantage in the idea that, because of the vastness of their possible needs, India and China might be considered separately from the smaller developing countries.)

4.

It is going to be difficult to balance China's needs against those of India, and the Indians will doubtless fight their corner skilfully and energetically. But we shall have to grasp the nettle soon. The Canadians, for example, have already done so. Apart from purely developmental considerations and from our growing bilateral interests in China, there is a general strategic interest in binding the country more closely to the West, by demonstrating the advantages of inter-dependence over self-reliance. Current uncertainty about US intentions only strengthens the importance of this. The delicacy and importance of our position in Hong Kong are another factor dictating particular attention by the UK to China's needs; we should certainly not be seen, if possible, to be doing less well by China than our competitors.

5.

There is a particular political reason why we need to

CONFIDENTIAL

/examine