CONFIDENTIAL
CHINA
UK/CHINA RELATIONS
1. Bilateral relations are excellent.
Hong Kong remains
a central element in UK/China relations. Close contact
on Hong Kong issues is maintained through the Joint
Liaison Group (JLG) which was set up in accordance with
the Joint Declaration and will establish a permanent base
in Hong Kong in 1988. The development of representative
government in Hong Kong has been a source of friction,
centred on Chinese concern that direct elections may be
introduced next year following the current review being
held by the Hong Kong Government. Ministerial and
political exchanges are increasing rapidly, as are
contacts and exchanges in all other fields. The State
Visit by H M The Queen, accompanied by Sir G Howe, in
October last year was a great success, as was the visit
by HRH Princess Margaret in May this year.
TRADE
2. The UK market share, although still small, is
increasing and the balance of trade with China has
improved. UK exports to China in 1986 were £536m and imports £327m. Although, following the conclusion of the
Hong Kong taiks, the Chinese indicated they would give
political support to British commercial efforts, it has
become increasingly clear that the Chinese are concerned about competitive pricing and many British companies will
be favoured only if HMG can offer concessionary finance.
Nevertheless, Britain is well-equipped to meet the main
Chinese development priorities, and British firms have been successful in winning contracts for machinery,
chemicals, aircraft, scientific instruments and steel.
SB3ABE
CONFIDENTIAL
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