B
CONFIDENTIAL
10. In trade and economic relations, we fulfilled or came close to most of our short-term objectives. Particular successes were the 27% increase in British exports; agreement on the Guangdong Nuclear Project; the offer of soft loans; progress on Agreements; the strong programme of trade-related high level visits; the opening of the Shanghai Consulate-General; the resolution of visa difficulties for Chinese business visitors; and the increase in numbers of Chinese students in Britain (together with agreement in principle to accelerate this through Sir Y K Pao's scholarship scheme). Premier Zhao Ziyang's successful visit provided a useful stimulus, and made the progress more visible.
A
11. 1986 could be a vintage year, at least present- ationally, although trade will probably not grow at the 1985 rate. The highlight will be the State Visit to China (12-18 October). Party General Secretary Hu Yaobang's visit to Britain (8-11 or 12 June) will set the scene. Developments in 1985 do not argue for any fundamental changes in policy. detailed list of FED's 1986 objectives is also attached. Currently the most prominent specific objectives are to ensure that the major visits are successful, and effectively complemented by others (particularly to Britain by younger Chinese leaders); to maximize the political and commercial impact of the soft loan package and to make the most of the new funds available for Chinese students to study in Britain (particularly under Sir Y K Pao's scheme). The beginning of formal negotiations on our claims in May will also require careful handling to ensure that the issue currently the only substantial non-Hong Kong bilateral difference - remains largely self-contained.
I
12. We must not be complacent. As the Ambassador says, if Hong Kong is taken away, there is limited substance to our political relations. And our trading performance is disappointing compared with some of our competitors. believe that there is probably little more HMG can do with current resources. We are already working hard to develop the political depth of the relationship (and few competitors can match a State Visit). Part of the problem lies in the private sector, and reflects our underlying industrial performance. Nevertheless, China is important to us and will become more so. We must not lose opportunities to build up the relationship.
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CONFIDENTIAL
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