TNAG-2708-FCO40-3914-House-of-Commons-Select-Committee-on-Foreign-Affairs-and-Par-1993 — Page 82

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Widespread lifting of price controls, notably in energy

sector.

Growing concern about inflation and overheating. Not yet serious problem, but more cautious approach may be reflected in People's Congress.

Foreign trade rose 20% in 1992 (imports + 20%, exports + 18%). Trade surplus US$7 bn.

Foreign Policy

In 1992 China established diplomatic relations with Israel and South Korea (a blow for Taiwan). Trade with South Korea US$10 bn 1992.

China also established diplomatic and trade relations with all FSU states, partly to prevent spill over of ethnic/religious unrest from Central Asia.

Clinton administration (with former Ambassador to China, Winston Lord, as Assistant Secretary for Asia) expect to attach conditions to MFN status. UK lobbying on behalf of both China and Hong Kong.

Despite improved relations with Vietnam, Gulf of Tongking (oil rights) and Spratley Islands remain potential flashpoints.

France forced to close Consulate in Guangzhou and being excluded from major contracts over sales of Mirage 2000s to Taiwan.

Proliferation Issues

China walked out of P5 talks on conventional arms transfers following US sales of F16s to Taiwan.

Signed Chemical Weapons Convention in January 1993.

Concern at sales of missile technology and civil nuclear technology to Iran and Pakistan.

FAR EASTERN DEPARTMENT

15 FEBRUARY 1993

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