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the financial feasibility of PADS.
However, probably the most we could hope for was that the Chinese Government would agree to give the project their general blessing. It was not clear whether this would be considered sufficient by the banks. The FCO was vigorously contesting the notion that a loan to Hong Kong should be regarded as Chinese sovereign risk. It was almost inconceivable that the Chinese would violate an international agreement registered at the UN which provided that Hong Kong should enjoy financial
autonomy.
5.
As far as the Lantau Fixed Link was concerned, Mr Adams said that Sir Piers Jacobs was keen to raise some of the money by borrowing. But others in Hong Kong appeared to be in favour of paying cash and running down the reserves even though this was less sound as a financial practice - because it would avoid the need for a Chinese guarantee of repayment. Mr Burns and Mr Adams agreed that we should urge the HKG to consult us as fully as possible over their financial strategy for the Fixed Link.
6.
Mr Adams said that the question of ECGD cover for PADS contracts was likely to come to a head sometime during the second quarter of 1991 when the banks would need a formal indication of ECGD credit terms for the airport platform and the Fixed Link. By that time the PMS review of the six concentrated markets should have been resolved. (The Prime Minister was likely to chair a meeting on this subject in early November). In the case of the Fixed Link, it was unlikely that contracts would be awarded until the summer because the design consultants, Mott Macdonald, had been asked by the HKG to do some further detailed work and this
would not be ready until next March.
Ministerial support for British companies
Mr Rogers referred to Mr Sainsbury's discussions with the Governor during his recent visit to Hong Kong. Mr Paul
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