TNAG-1900-FCO40-2699-Future-of-Hong-Kong-briefing-1989 — Page 119

cooperation and a ban on arms sales, postponement of new cooperation projects, reduction of cultural and scientific cooperation and the

postponement of the examination of new requests for credit insurance

and of new World Bank credits. The Chinese have rejected these

demarches as interference in China's internal affairs.

4. The Presidency has indicated that it wishes Political Committee

discussion of China to concentrate on the attitude that the Twelve

take towards China in coming months, particularly in economic and trade links and in cultural and scientific cooperation. Partners

may have interpreted areas of the Madrid Declaration differently.

Some (eg the Dutch) have taken a strict interpretation and have

frozen a wider range of cooperation with the Chinese. Differences

may come to the fore in the area of concessional finance and of

export credits where there is considerable scope for variation in member countries' interpretation and where commercial pressures for

countries to relax their stance may build up.

UK Measures

5.

On the question of concessional financing for projects in China

(a second soft loan agreement for £300m was signed with China in 1988) projects for which concessional financing is already being provided are to continue. In line with the Madrid Declaration consideration of any new projects under these finance arrangements is suspended. There is however a grey area where some offer of financial support may have been made but where formal agreement has not yet been signed. Such projects are being considered on a

case-by-case basis to establish whether support should go ahead. One of these, for a radar project, has already been the subject of

contact between ourselves, the French and the Italians, all of whom

have companies bidding for the contract. In general this is an area where member states do not which to breach the Madrid Declaration, but do not wish to disadvantage their companies by taking a stricter interpretation.

6.

Export Credit Cover. Here it has been agreed that short term

cover for normal trade can continue. Medium and long term cover for projects is being considered on largely the same basis as concessional finance projects given above. With projects in the

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