TNAG-1744-FCO40-2463-Visits-by-FCO-officials-to-Hong-Kong--including-visit-by-Lor-1988 — Page 40

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INFO IMMEDIATE BRITISH COUNCIL, DTI

INFO ROUTINE HONG KONG

LORD GLENARTHUR'S VISIT TO CHINA: TALKS WITH ZHOU NAN:

BILATERAL ISSUES

A) TRADE AND ECONOMIC RELATIONS.

1. LORD GLENARTHUR SAID BOTH SIDES WANTED TO STRENGTHEN THESE LINKS.

THE UK WAS PARTICULARLY WELL PLACED TO HELP IN THE ENERGY AND

COMMUNICATIONS SECTORS. OUR FIRST SOFT LOAN OF 300 MILLION POUNDS HAD NOW BEEN ALLOCATED AND CONTACTS SIGNED FOR YUEYANG, CHONGGING AND BOHAI. BUT UK EXPORTS IN JANUARY-APRIL 1988 WERE 15 PERCENT DOWN

ON LAST YEAR. WE HOPED TO SEE AN INCREASE OF BUSINESS ON ORDINARY

COMMERCIAL TERMS. ZHOU NAN AGREED TRADE/ECONOMIC RELATIONS WERE

GENERALLY GOOD. HE HOPED THE ECONOMIC REFORM PROCESS WOULD INTER

ALIA ATTRACT MORE INVESTMENT TO CHINA FROM THE UK AND FROM BRITISH INVESTORS IN HONG KONG. HE HAD BBEN GLAD TO HEAR OF THE THREE NEW.

CONTRACTS MENTIONED BY LORD GLENARTHUR WHICH WITH THAT FOR THE

SHANGHAI FLOUR MILL, TOTALLED 400 MILLION US DOLLARS. HE APPRECIATED HMG'S ''POSITIVE ATTITUDE'' ON SOFT LOANS AND HOPED THE TALKS NOW

GOING ON WOULD PRODUCE A LARGER SECOND TRANCHE WITH MORE FLEXIBLE

COVERAGE. HOWEVER, CHINA STILL HAD A DEFICIT ON BILATERAL TRADE AND

HE HOPED THE UK WOULD LIBERALISE IMPORT CONTROLS AND INCREASE QUOTAS TO IMPROVE CONDITIONS FOR LONG-TERM GROWTH. HE REFERRED TO

DIFFERENCES IN CHINESE AND UK BILATERAL TRADE STATISTICS (LORD

GLENARTHUR CONFIRMED THAT THE LATTER DID NOT INCLUDE HONG KONG).

2. LORD GLENARTHUR POINTED OUT THAT WHILE UK EXPORTS WERE FALLING, CHINESE EXPORTS TO BRITAIN SHOWED A STEADY RISING TREND OF C. 15

PERCENT PER ANNUM. RULES FOR QUANTITATIVE RESTRICTIONS WERE AN EC RESPONSIBILITY, BUT THE UK HAD FEWER QUOTAS FOR CHINA THAN ANY OTHER MAJOR EUROPEAN PARTNER. THESE WERE PURELY TO PROTECT CERTAIN AREAS

OF DOMESTIC INDUSTRY AND WERE KEPT UNDER REVIEW. LORD GLENARTHUR REFERRED, FINALLY, TO THE VERY SUCCESSFUL VISIT OF THE SECRETARY OF STATE FOR ENERGY TO CHINA ON 10-16 JUNE AND OUR APPRECIATION FOR THE

ARRANGEMENTS MADE BY THE CHINESE. ZHOU NAN CONCLUDED THAT THE

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