CONFIDENTIAL
conomic cooperation and cooperation in nuclear energy.
Last month
the Chinese Trade Minister signed with Sir Geoffrey Howe agreements on investment promotion (providing formal guarantees to encourage confidence among British investors in China) and on development loans (providing for a £300m soft loan to China, repayable at 5% over 20 years, to buy British equipment for major development
projects).
5. Both governments have been working hard to increase the number of Chinese students in Britain, most of whom undertake study and
There are now around research in technology and applied science.
1400 (cf USA, 14,000; FRG 2,000; France 1,000) of whom just under Sir Y K Pao's scheme, to half receive support from public funds. which we will contribute £700,000 pa (and the Chinese government and Sir Y K £1.4m pa each) should bring around 350 further students each
year.
6.
HMG also supports an active and growing programme of science and technology cooperation. The British Council sponsors collaborative research projects between British and Chinese Universities (one of which has, for example, developed a low cost solar-powered refrigerator for use in the third world). There are specialist science and technology agreements between British and Chinese Ministries covering space, medicine, agriculture, roads and railways. Under the technical cooperation programme the ODA provides technical consultancies in fields from satellite remote sensing to urban water management and offshore oil exploitation. The Royal Society's most active collaborative programme is with
China.
7. Our major remaining bilateral difference is over governmental claims. These amount to £460m and cover commercial, private and government property taken over following the establishment of the PRC in 1949, together with default on repayments of sterling bonds. The Chinese have ruled out some 80% on grounds of principle, and counterclaimed some £90m. Formal negotiations began in Peking in May when each side outlined its position. Progress will not be easy; our next objective is for the second round, for which the Chinese have agreed to come to London, to take place as possible. China's only material incentive to settle is the prospect of access to the London bond market, to which the Bank of England is
soon as
/denying
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