AID AND TRADE PROVISION
RESTRICTED
14. Since 1986 China has been an important recipient of ATP funds. China and Indonesia are the only developing countries with which the UK has signed concessional financing arrangements (CFAS). In resource terms ATP is the most important part of our aid programme to China. In September 1988, in Beijing, Mr Patten
signed our second CFA with China pledging ATP support for the export of UK goods and services up to a
to a total value of £300
million. These funds have now been almost fully committed to 11
projects in power, transport and manufacturing. Major projects
include a £98 million Snamprogetti contract for an ethylene plant
at Dushanzi, and a £70 million Foster Wheeler contract for a pure
terephthalic acid plant at Urumqi.
15. The Chinese are pressing for a third CFA. A decision on
this awaits the outcome of the interdepartmental global review
of ATP. It is envisaged that we may end up with a smaller CFA
with a shorter timescale. However, HM Treasury are concerned
about ECGD overexposure in China and Hong Kong, and are discussing whether the two markets should be regarded as one for
the purposes of risk assessment. We would also be hesitant about
offering the Chinese a new CFA if Sino-British relations over Hong Kong deteriorate. If there is a third CFA, it will focus
on different sectors, as the recent OECD Helsinki agreement rules
out ATP support for commercially viable projects this excludes
major electric power schemes and manufacturing projects.
-
16. We are concerned that the Chinese practice is to pass on the
full concessionality of our ATP credits to end-users. In
addition aid financed imports escape import duties. This adds
to the distortions through subsidy within the Chinese decision-
making system and probably results in misallocation of resources
and aid support for non-viable public sector enterprises.
RESTRICTED
No comments yet.
Private notes are available after approval.