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SIR Y K PAO'S VISIT TO BRITAIN, JUNE 1986
(d) SIR Y K PAO SCHOLARSHIP FUND Background
1. When Sir Y K met the Prime Minister in October 1985 he proposed the establishment of a trust fund to enable more Chinese students to study in Britain. The Chinese Government had indicated support and, in December last year, the Prime Minister agreed in principle that the UK would contribute. A Memorandum of Understanding (MOU) was negotiated in May with officials of the Chinese State Education Commission (SEDC) and Mr Stephen Pan of Sir Y K Pao's London Office. This is to be signed at 10 Downing Street on 9 June, in the presence of the Prime Minister, and General Secretary Hu Yaobang, by the Secretary of State, Sir Y K Pao and Chinese Vice Premier Li Peng (who is concurrently the Minister in charge of the State Education Commission).
2.
The Scheme will cost £35 million (expressed in sterling) over 10 years. The Chinese government and Sir Y K Pao will each contribute the equivalent of £1.4m pa; we will provide £700,000 pa. There will be no trust fund, as neither we nor the Chinese government were willing to put up the capital sums required. Instead the two governments will meet current costs as they occur. Sir Y K Pao's contribution, which will be provided through a foundation he has established for the purpose, will be channelled to either government as required during each year. In practice, most of the foundation's contribution as well as all of HMG's will be spent in the United Kingdom on fees and related costs. The scheme will be called the "Sino-British Friendship Scholarship Scheme" (at Sir Y K's suggestion).
3. A Commission will oversee the scheme. Each party to the MOU is to be represented by two Commissioners, including Sir Y K Pao himself, who is to be the first Chairman (officials are currently considering UK representation). But the Commission itself is to be a representational rather than executive body. The practical administration of the scheme at the UK end will be by the British Council, who will manage this programme much as they do our conventional training programmes for China.
4. The administrative costs of the British Council (probably around £250,000 pa) were a major difficulty in the negotiations. We had intended that these would be
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