TNAG-1483-FCO40-2037-Economic-situation-in-Hong-Kong-1986 — Page 152

IN CONFIDENCE

SECTION II: UK Export Promotion Strategy

a) Historical reasons underlying the current strategy, and the division

between trade policy and trade promotion work.

The historical background to current UK trade policy and export promotion strategy

as described in Section IIb iii is that UK-China political relationships are the best they have ever been and that China is embarking a long-term growth plan offering unprecedented long term opportunities. UK investment in China is low.

b) Assessment of the effectiveness of the current strategy

i) UK strengths in the market

UK industrial strength in China's priority sectors.

Good political relations.

£300 million development loans.

Willingness to discuss technology transfer.

ii) UK weaknesses in the market

Chinese buyers often say UK prices uncompetitive. UK companies less aggressive than competitors: China unaware of UK products. Many UK companies poorly informed about the China market. Constant criticism that UK companies do not visit China, especially the cities outside the main centres.

iii) Current UK export promotion strategy, and likely outcome for UK exports

Current UK trade policy and export promotion strategy is aimed at building on our strengths and overcoming our weaknesses by:

(a) allocating to China more than a proportionate share (measured in terms of our exports) of BOTB manpower and budgetary resources;

(b) re-opening the Consulate-General in Shanghai in 1985, and some strengthening of the commercial staffing at Peking and the China Trade Unit, Hong Kong;

(c) continuing high level of 2-way Ministerial visits; increasing the quality of BOTB supported Outward Missions and Exhibitions in China through the priority assessment exercise;

(d) willingness to consider ATP grant-credit mix for some projects, in addition to the £300 million loan facility but insisting that most business has to be on normal commercial terms;

(e) willingness to consider reasonable Chinese requests for relaxations in quota restrictions where these can be granted without unacceptable damage to UK industry;

(f) a positive attitude to the extent consistent with UK strategic interests - in disucssions about relaxation of COCOM restrictions and in our processing of individual export licence applications.

(g)

increased ODA expenditure on training (eg under the Sino British Friendship Scholarship Scheme) and on TC consultancies.

Assuming that China achieves its foreign trade growth target of around 7% a year, UK exports could be expected to grow at about the same rate,

But there could be sharp variations from year to year influenced by success or failure in winning individual large contracts.