TNAG-1464-FCO40-1991-Visits-by-Chinese-officials-to-the-UK--including-visit-by-Hu-1986 — Page 65

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British prices are often uncompetitive (and have acquired a probably exaggerated reputation as such).

11.

Our new £300m soft loan programme should provide a helpful

stimulus. It has been politically well-received as a signal of our wish for a long-term stake in Chinese modernization. (See Annex II

for initial candidate projects and other major commercial

prospects).

In

12. Britain has been at the forefront of recent moves within COCOM

to relax restrictions on Chinese access to high technology. response to strong political pressure, the US have now withdrawn their objection to a number of commercially important British optical fibre telecommunications projects in China. The Chinese have consistently lobbied for China's removal from COCOM controls. 13. China is unlikely to purchase foreign defence equipment on a

large scale. Nevertheless, there are significant opportunities for Britain, for example in avionics, communications systems, radar and torpedos. In June 1985, we relaxed our policy on defence sales to China so as to allow China access to technology comparable to other developing countries with expanding defence industries (subject to COCOM obligations). Following Mr Lamont's visit to China, a governmental Memorandum of Understanding on defence procurement issues is likely shortly to be signed.

14. The Chinese need to increase exports rapidly following their large 1985 external trade deficit. They are concerned about Western protectionism. Their main complaints have been with the US; but they have also lobbied us on TV sets (currently denied all access; a

quota is under consideration). The Chinese have also made clear their intention to apply for membership of the GATT. Tough negotiations will be required to protect Western commercial

interests (for political reasons there is no question of the Chinese

being denied membership).

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