TNAG-1622-FCO40-2236-Relations-between-Hong-Kong-and-China-1987 — Page 218

CONFIDENTIAL

11. As Sir R Evans notes, the other principal

development in the course of 1986, has been China's

studious wooing of east and west Europe. This is part of her attempt to limit the power of the two super-powers. We can expect more of this in 1987.

Sino-British Relations

12. Bilateral relations have reached a new warmth and

we have caught up on much or all of the ground lost to

other European countries. But they still remain short on

substance. This is not surprising given geographical, population, cultural and industrial differences. We nevertheless should work to put further substance into the relationship, but we should not fool ourselves that

it will be easy to turn existing goodwill to our

advantage. There are no signs, even following the State Visit, that China is prepared to put the UK in a more favoured position than any other European country. Rather, we now face a China which is herself attempting

to cash in on the goodwill in the relationship, by asking for better treatment on soft loans and import quotas. There are some areas in which we can be more generous to

China, eg on visas and on COCOM, but we must ensure that in those areas of principal interest to us, Hong Kong and trade, that we reap some new rewards.

13. Sir R Evans lists four British interests in

relations with China. The first, obtaining a square deal

for Hong Kong, was successfully handled in 1986. The

third, obtaining a growing share of the Chinese market,

was also successfully addressed in 1986, with British

exports now exceeding £500 million per annum (an increase

of 35% over 1985's performance though we will need to

FC4AAK

CONFIDENTIAL