TNAG-1343-FCO40-1773-Visit-by-Margaret-Thatcher--UK-Prime-Minister--to-Beijing-fo-1984 — Page 197

CONFIDENTIAL

signing contracts by then, nor have the Chinese proposed a clear

timetable for future negotiations. We are currently discussing with

the French how we can extract maximum leverage from the 15 January

deadline, and are due

and are due to see a delegation from Bank of China before Christmas. The brief suggests that if the Prime Minister is pressed

to extend further the 9 per cent rate, she should simply take note

of the request and make no commitment. It may be necessary to amend

this if the position changes as a result of our discussions with the

French or Bank of China.

CREDIT PREMIUM

In

5. The Chinese are aware that the French have recently upgraded China to their best risk category for credit premium purposes. November ECGD also decided to up-grade China from its category B to category A. The Chinese have previously expressed concern at the size of the (grade B) British premium compared with the French on

the Guangdong project. The brief recommends that the Prime Minister

inform Premier Zhao of our decision to regrade China, but this

should be coupled with a clear statement that there can be no

negotiation on premium level for Guangdong beyond this. This caveat is important because even with an A grade premium, the amount of our credit premium will be proportionately higher than that of the

French. We wish to resist Chinese pressure in negotiation to match French levels, which could be very costly.

CONFIDENTIAL