TNAG-2981-FCO40-1473-Guangdong-nuclear-power-station-project-1982 — Page 40

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BY LU YING ON PHILCOX/POTTER NET, A COPY OF WHICH IS BEING

SENT TO YOU BY BAG. WE BELIEVE CHINESE TOOK FULLY ON BOARD THAT HMG

WOULD NOT BACK THE PROJECT UNLESS GEC SECURED THE WHOLE

CONVENTIONAL ISLAND. THE MINISTER REMAINED CONCERNED, HOWEVER,

DESPITE USEFUL INDUSTRIAL VISITS TO GEC FACTORIES, THAT GEC COULD

NOT MATCH FRENCH DEPTH OF PWR EXPERIENCE AND SERIES PRODUCTION: WE

BELIEVE THIS, RATHER THAN PRICE, IS THE MAIN CONCERN. BUT WE ALSO

BELIEVE CHINESE ACCEPT THAT THEY IN THE END MUST GIVE GEC THE

CONVENTIONAL ISLAND TO SECURE. HONG KONG'S PARTICIPATION IN THE

PROJECT. THEY WILL NOT COMMIT THEMSELVES TO GEC UNTIL THEY HAVE

EXPLORED FURTHER THE EQUITY QUESTION AND ARE CONFIDENT THAT A

SATISFACTORY OFF-TAKE AGREEMENT CAN BE ACHIEVED. WE BELIEVE THAT

THE OFF-TAKE ISSUE CAN BE RESOLVED BUT ARE LESS SANGUINE ABOUT

RAISING THE FOREIGN EQUITY HOLDING, NOT LEAST BECAUSE OF THE OPEN-

ENDED NATURE OF SUCH A COMMITMENT. I UNDERLINED THE DIFFICULTY ON

EQUITY WHILST TRAVELLING IN THE CAR WITH THE MINISTER TO HEATHROW

YESTERDAY, WHILST AT THE SAME TIME REITERATING THAT FROM THE CHINESE

POINT OF VIEW IT WAS REALLY THE OFF-TAKE AGREEMENT WHICH WAS

IMPORTANT.

9. ON CAPITALISATION I AM SENDING YOU IN THE BAG A COPY OF THE

EXCHANGE OF CORRESPONDENCE BETWEEN MINISTERS. (THIS SHOULD NOT BE

REVEALED TO CLP AT PRESENT.)

10. WE FELT ALL THE WAY THROUGH THE DISCUSSIONS THAT DESPITE THE

CHINESE WORRIES ABOUT GEC'S LACK OF EXPERIENCE ON 900 MW SETS THEY

RECOGNISED THE STRENGTH OF THE UK'S POSITION IN HONG KONG. IN FACT

AT ONE POINT THEY USED THE EXPRESSISON QUOTE. HONG KONG CARD UNQUOTE.

11. ON TIMING OF DISCUSSIONS WE WERE ANXIOUS NOT TO HAVE TALKS ON

HONG KONG ASPECTS BEFORE TECHNICAL DISCUSSIONS IN PEKING, HENCE

COMPROMISE OF PARALLEL TALKS. LI PENG AND VICE-GOVERNOR YE BOTH

HOPE, SUBJECT TO THEIR GOVERNMENT'S APPROVAL, TO TAKE PART IN HONG

KONG DISCUSSIONS.

12. YOU SHOULD KNOW LI PENG WENT TO FINLAND FROM UK IN RESPONSE TO

LONG-STANDING INVITATION UNRELATED TO GUANGDONG BUT HE IS RETURNING

FROM FINLAND TO PEKING ON WEDNESDAY VIA ZURICH.

13. WE ARE CONSIDERING IN LIGHT OF OUR DISCUSSIONS APPROACHES TO THE

FRENCH AND HONG KONG GOVERNMENTS. DEPENDING ON THE DISCUSSIONS WITH

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