CONFIDENTIAL
important strategic interests in common as well as
important areas of difference. Our influence in Peking
can be increased by thickening up the network of
relations between' Britain and China, exposing the
Chinese more closely to our views and capabilities.
This is particularly true in the commercial field
where, mainly because of China's economic readjustment
policies, British export performance has been disappoin-
ting over the last two years. At present China is a
less valuable market for us than, say, Taiwan and we
are less important suppliers for the Chinese than, say,
West Germany and France. Winning major contracts for
the Guangdong project could transform the situation,
just as the Chinese economy begins to pick up again.
4.
But above all it is with Hong Kong that we are
concerned. Binding the Chinese into a stronger trilat-
eral relationship
-
China/Hong Kong/UK with major
economic benefits for all participants could strengthen
our political hand as we embark on discussions about
Hong Kong's Future as well as supporting confidence in
Hong Kong. It would demonstrate our commitment to
long-term enduring responsibilities and other ties.
By corollary there could be a damaging effect on
confidence now if GEC were seen to withdraw.
Particular-
ly in view of previous government involvement it would
be difficult to dispel speculation that we were pulling
out because of uncertainty about prospects for agreement
with China over the Future of Hong Kong.
CONFIDENTIAL
7
/5.
Finally,
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