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established between the Foreign Secretary and Mr. Wu.
The Ambassador said that trade between Britain and China was increasing satisfactorily. He understood that Lord Young would be leading a further delegation of businessmen to China later this year.
The Prime Minister said that we had been
very grateful to the Chinese Government for placing an order for container ships in the United Kingdom. She understood that negotiations were in progress over the Yueyang Power Station for which we were offering finance under our soft loan agreement. Unfortunately there appeared to be difficulties on the Chinese side. It was very important to bring the negotiations to a successful conclusion as evidence that our co-operation was flourishing. The Ambassador confined himself
to saying that he knew negotiations were in progress.
The Prime Minister said that we were all concerned with the situation in the Gulf. It had be a one of the main subjects of discussion at the Venice Economic Summit. We were in touch with the Chinese Permanent Representative at the United Nations about efforts to find a possible solution to the Iran/Iraq conflict. We were particularly concerned at Iran's deployment of Silk-worm missiles and hoped that no more of these missiles would be sold to Iran. The Ambassador said that the Iranian Foreign Minister had recently visited China. The Chinese leaders had appealed to Iran to find a peaceful solution to the conflict. China was neutral and did not sell arms to either side. Despite what was said in the press, the Silk-worm missiles in Iran had not come from China. The Prime Minister expressed polite disbelief. The Ambassador was unmovable. If there were Silk-worm missiles in Iran they had not come from China.
The Ambassador said that his successor, who was an old colleague from the Chinese Embassy in Washington, would arrive in late August. The Prime Minister said that he could be assured of a warm welcome.
I am copying this letter to Timothy Walker (Department of Trade and Industry) and to Ian Andrews (Ministry of Defence).
you much.
(C.D. POWELL)
R.N. Culshaw, Esq., M.V.O., Foreign and Commonwealth Office.
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