CONFIDENTIAL
The biggest outstanding project is the Guangdong Nuclear Project, which is GEC's main interest. There are particular Hong Kong reasons for not pressing this to a conclusion during the Prime Minister's visit. The project is not a very popular one in Hong Kong, where the population are worried about possible nuclear pollution, and also suspect that the Hong Kong consumer may eventually be asked to pay more for his electricity than he would have to pay if it came from a conventional source. There is some tendency to believe that the Hong Kong consumer is being sacrificed in order to provide contracts for British industry.
The position in the negotiations is as follows. The Joint Venture Company (JVC) between the Chinese and the China Light and Power Company in Hong Kong has not yet been set up. Commercial negotiations could start informally before the JVC is set up. But contracts can only be signed after the JVC is formed, and after the financial negotiations between the UK and French Governments and the Bank of China are completed. The JVC cannot be formed until China Light and Power have put the draft agreement to the Hong Kong Government and EXCO have approved it. The earliest date on which EXCO could consider the matter is 18 December. Moreover, as the Governor points out, it is quite probable that more than one meeting will be needed before EXCO can reach a decision. The financial negotiations relating to the Guangdong contract cannot be concluded until the Bank of China carry out a thorough evaluation of the project's viability, which can only realistically be done after the JVC is set up.
It would of course be possible to try to speed up this process.
But it is most unlikely that negotiations could be concluded in time for anything to be signed during the Prime Minister's visit. And to accelerate the negotiations would involve trying to rush EXCO into taking decisions earlier than they had planned and before they are ready to do so. This would almost certainly fail, and might very well lead to EXCO taking a decision against the project. This would be disastrous. In all the circumstances the Foreign Secretary concludes that it would be most unwise to try to push this whole matter ahead faster than is at present scheduled.
The Foreign Secretary believes that the Prime Minister's visit will provide important opportunities to promote our commercial interests, including the Guangdong Nuclear Project during her talks with Chinese leaders. The content of these talks will not be public, and thus there would not be the same presentational risks vis-a-vis Hong Kong. These talks could identify the main areas of opportunity for British exports to China and could be followed up by appropriate business visits. There will be further opportunities during the visit of Premier Zhao to this country during 1985. There will therefore be no lack of
CONFIDENTIAL
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