HL Deb 19 May 1982 vol 430 cc763-94

6.55 p.m.

Lord Rhodes rose to ask Her Majesty's Government whether, in view of the recognised importance of relations between the United Kingdom and the People's Republic of China, they will support the maximum exchange of views between the two countries at all levels.

The noble Lord said: My Lords, I have tabled this Question with the object of airing how best we can help China to realise what she has set out to do, and to help ourselves at the same time. I hope that nobody in your Lordships' House imagines that I am setting myself up as an expert on China, because I am not. I am just a humble student of what is going on in China, having had the opportunity to establish links which otherwise might not have been established. During the past five years there have been four British parliamentary delegations to China. Three of them were organised by me and were financially supported by my friends—all because I once overheard a remark by the then Chinese Ambassador to Britain, when he said that Great Britain was ostentatiously absenting herself from China. My purpose in this connection is to try to remedy an omission.

No official funds were available because the Chinese were not members of the Inter-Parliamentary Union. Then the Chinese promised to join the Inter-Parliamentary Union, so it was possible to send a delegation from the Inter-Parliamentary Union this spring. The first delegation I took was at the time when Mr. Deng Xiaoping assumed power following the death of Chairman Mao. For 11 years Chairman Mao had fought an ideological and moral revival under cover of the Cultural Revolution. This was a failure. As an example of its barrenness, not one single medical doctor qualified in China during those 11 years. The situation now is not one of ideological and moral renewal; the question is, can a communist regime reform itself? Can they cut out the bureaucratic deadwood and corruption? Can they counter the mood of hopelessness among their young people? Can they reform the structure of their Government so that the left hand knows what the right hand is doing?

An attempt is being made to solve these and many other problems by a new constitution which will receive the sanction of Congress in the autumn. Let me just set the scene briefly. In 1977–78, after the Cultural Revolution ended, orders were placed for large, complete plants which were unrealistic. The Chinese then adopted more practical policies and, being cautious about involving themselves in too much international debt, and also conscious of their shortage of managers, they naturally had to cut back. I am afraid that British industrialists over-reacted to China's readjustment compared with the French, Germans, the Americans and the Japanese. Experienced traders see in China better opportunities ahead for regular and profitable trade. Despite the fact that the number of complete plants China has ordered is reduced, there is wide scope for medium-sized and smaller deals in specialised equipment and in requirements for the modernisation of large numbers of China's 350,000 factories. Here surely there is an opportunity for our middle-sized companies searching for export business.

We have been debating coal today. China mines 600 million tonnes of coal a year, the United States 968 million tonnes, the USSR 670 million tonnes. Plans are going ahead in China for increasing that by 20 million tonnes a year and this should mean repeat business for our manufacturers of mining equipment. For a long time many of our telecommunications companies, aircraft components and systems companies have had good relations with Chinese operators, and although we are well down the list in the league table of countries trading with China there is no doubt that Chinese leaders are eager and keen to expand trade with us. And there is a need above everything else to keep a grip on the Chinese market.

My first point is a minor one, but important, British Government representation in China, While we are well represented by Sir Percy Cradock and his staff in our embassy in Peking, there is no consular service elsewhere and I am convinced that we need a consul-general in Shanghai. Of all the regions in China, Shanghai people are the toughest and most sophisticated. This arises from long experience as traders with the rest of the world. Many of the most successful Hong Kong managers originally hailed from Shanghai. Enormous trade is transacted there. The Peking administration admits these facts and handles Shanghai matters with their gloves on.

It would be helpful to traders in China and the North of England if a consul-general for China could be appointed with an office in Manchester. It could be staffed at its inception by a British national working on a voluntary basis, as many regional consuls do in this country. If this idea were to take root, I would help to establish it.

My next point is a big and important point and the Government would do well to take special notice of it. It is to do with COCOM, which is the co-ordinating committee for NATO which has to do with the licensing of strategic goods. It is an anachronism which calls for reform; misapplication of export controls to China, who for this purpose is treated as a member of the Eastern bloc. What are we doing in thinking about China being a member of the Eastern bloc any more when in point of fact 51 Russian divisions are held down on the borders. These are friends of ours. It may have been necessary in 1957 when it was first applied but surely it makes no sense today. Politically we have to regard China as a friendly nation. According to evidence given by John Holdridge, the United States Assistant Secretary of State for East Asia, he corroborates my statement that 51 Soviet divisions are pinned down on the borders of China. Why cannot we give China the same treatment as we do to other friendly nations? Indeed, only this month the Reagan Administration has been to Congress to alter its status in America. Well, we do not want to be behind. A change of heart has taken place there.

I have been told by British manufacturers that COCOM is used by United States representation to deny access for everybody else to the China market. COCOM is a bureaucrat's paradise and there is evidence available of its incompetence. Some of the most glaring examples stem from the scientific instrument exhibition where China ordered instruments which took over 12 months before they could get sanctioned through COCOM.

My next point is a small one, but important. We expect our Prime Minister to go to China in September She is highly regarded there and she need have no qualms whatever about being well received. But I think it would go down very well with China if she were accompanied by our Foreign Secretary. If this could be arranged, it would be regarded as a great compliment by his opposite number, Mr. Huang Hua, and it would go a long way towards establishing a basis for future discussions about Hong Kong.

My next point is another important one, and I hope that this will be enlarged upon by my noble friend Lord Bowden who I notice sitting on the Back Benches. Technical assistance has been going on for some years. Experts from British manufacturers, under the auspices of the 48 group, have built up a technical exchange programme which has incorporated universities and national research institutions. The companies who have taken part in all this naturally have benefited, but the Chinese, too, have a better appreciation of our technology as a result. But there are problems because money is short and private people have to cut back just like Governments have to cut back. The Royal Society has helped, but generally speaking there has been a cut-back from private sources, as I said before. Surely here is an urgent case for Government assistance.

Allied to this there is another important factor. Our competitors in the United States and Europe, and of course the Japanese, are doing more than we are in taking bright young Chinese into their factories for training, and this is another area that would do nothing but good. Here I want to pay a tribute to our new recruit to this House, Lord Kadoorie, because if it were not for him there would be another 2,000 unemployed in Manchester. We are fortunate in this House that we have him at hand to give us advice about the goings-on in the Far East because he is the doyen of men who have Far Eastern knowledge.

I want to say a word about credit facilities. At the end of 1978 seven British banks, with the backing of ECGD, put up a total of 1,220 million dollars to be made available for Chinese importing agencies. No more than half of that has been taken up. But it is interesting to know that during the last month the senior executives of the Bank of China have been advising Chinese departments and enterprises to make use of buyers' credits because the interest rates are lower than those in the market. This is a major change from what transpired only a few months ago. It would be well for our manufacturers to take note of this.

As we know, Japan has given, through its economic co-operation fund, massive long-term low interest loans to China to fund the building of six ports and railway lines to haul coal to the coast. The Belgians in 1980 granted China a 30-year loan, interest free for the first 10 years with repayments and charges spread over the remaining 20 years. This was for a 240 million dollar contract for power station equipment. More recently the Government of Denmark and the West German Government have also entered into substantial contracts for container ships et cetera. Would it not make economic sense if we could possibly manage to see to it that there was a soft loan directed to specific parts of our engineering and telecommunications industry to keep people at work?

Some times I think that we are prisoners to the present, that we are so pushed around by day-to-day happenings that we do not have time to think about what will happen five, 10, 15 or 20 years hence. We are short of visionaries, we are short of people who can think about what is likely to happen. This short-term thinking will lead us into very serious trouble apart from the Falklands and all the disruption and violence that goes on. If we think anything about our country in the years ahead, we surely must be thinking in terms of China.

Finally, in a long life I have come to the very clear conclusion: never pull anything down until you know what you are going to put up in its place. That bit of advice would be well taken by China, too, in its dealings concerning what the British have done in Hong Kong. I leave it to others who know more about it than I do to discuss this subject. But let me say that getting on good terms with a 1,000 million people cannot be wrong.

7.13 p.m.

Lord Mackie of Benshie

My Lords, I must start with an apology to the House in that I foolishly mistimed the start of this debate and I may have to leave before the end, in which case I shall read what the Minister says with enormous attention in the morning. However, first I should like to say how grateful we should be to the noble Lord, Lord Rhodes, for initiating this debate which he has done with his usual skill, leaving the terms so wide that we can talk about anything. I would like also to express my personal great gratitude to him for taking me to China three times. I am not quite sure why he did so, but I think it was because I was an object of great amusement when we went to places, and little girls who were very neat and tidy would look at this figure and suddenly politely cover their mouths with their hands and giggle quietly, calling on others to look at this curious British specimen who had been brought over there by the noble Lord, Lord Rhodes.

Lord Stone

You should have had your kilt on.

Lord Mackie of Benshie

My Lords, even without my kilt they considered me extremely impressive.

Lord Bowden

You were an English peasant.

Lord Mackie of Benshie

Indeed, my Lords, However, my gratitude to the noble Lord, Lord Rhodes, is really very deep because China—as it did to all of us—made an enormous impression upon me. The first time that we crossed the famous bridge and got into a train and travelled throughout that country, my farmer's eye was wholly delighted. I have never in all my life seen stretches of country so well farmed. I have seen other tropical agricultures since, but they do not compare with the way in which that land is handled. It is handled with the dedication and hard work of generations past which had a profound effect on me and made a profound difference to my thinking about the Chinese people.

Something else that impressed me was, of course, the Chinese people themselves, from the very able young diplomats who took us around, to the managers we met, to the professors, to the people in the fields and to the squads who were threshing the grain with flails—they were most amused when I tried to flail, and I am sorry to say I did not make a very good job of it. They were tolerant and they were nice. I never heard any Chinese man or woman tell me the honest truth; they were civilised and people of high culture when my ancestors considered wood as the most advanced thing they had ever seen.

But the whole civilisation is extraordinarily impressive, and, without any doubt, when the noble Lord Lord Rhodes, says that it cannot be wrong to get on good terms with 1,000 million people, I would add that it cannot be wrong to get on good terms with 1,000 million nice people. It is very important for one to get on with and like the people with whom one is dealing, and in the case of the Chinese, having been to that country only three times with the noble Lord, Lord Rhodes, there is no doubt that that was the case for me.

If we are to help, perhaps we should individually talk about some aspect that we know. I have obviously studied agriculture. Quite apart from admiring it, I was also critical of many of the factors we saw. There are something like a 1,000 million people in the country and about 800 million of them live in the countryside and a very large number of them in the communes actually work on the land, the majority attending it with a garden-like care. Of course, they want to progress from that to producing more with fewer people. I do not think that they should progress too fast because it would be very difficult to match the intensity of the agriculture and the production of food per acre with any mechanised system.

They have vast areas of grazing land. The land is as different as chalk from cheese. They have land which is like our Scottish highlands, only subject to a much worse winter. They have land which is like the grazing land of Texas, where the strong sun after the rain preserves the vegetation in a form of hay. All of that is there to be developed. It is all there to be mechanised and to have water led to it. They can still extend further their amazing irrigation schemes, which are not confined to the river beds and the land alongside the rivers. They pump in water to the tops of hills. We saw a commune there right up on top of a hill with a marvellous view; the state had provided the machinery; the commune members had installed it; and right up on top of this hill they were growing fruit trees which were coming into fruit, and more and more fruit was being sold every year. All over China different developments of this kind are going on. This is an enormous industry which is advancing and which needs a great deal of help. The Chinese are willing to accept help if it is of the right sort.

The criticism that I would make to Her Majesty's Government is that we are not going about this in the best way. I know that the British Agricultural Export Council has been to China and has taken people out there from different firms and different breed societies; I know that they have sold a number of machines, cattle and pigs and so on to China. But I suggest that we need a much more co-ordinated approach. I believe that this should be done by a body of people —not a very large one—based in Hong Kong. In the Department of Agriculture in Hong Kong you have an extraordinarily efficient body which has done the right thing for Hong Kong. It has been greatly assisted by the Kadoorie family, whose institute has produced the kind of pig that they need in Hong Kong, which is an open port trading freely with the world and cereals can be brought in to feed the pigs. The pigs that they have produced there live in a hot climate and thrive on the sort of food available.

In China, as near as we could guess, there must be at least 300 million pigs—I could not count them. These pigs eat a lot of food, but much of the food they eat in China at the present day is like weed, waste and so on, and this is why they are ugly looking pigs with large bellies. But, if they are replaced with a sophisticated pig which eats grain, China would need to import some 50 million tonnes of grain or some impossible figure like that. That is why I think we need a small institute, based in Hong Kong with branches in China, which could study the long-term needs of Chinese agriculture, which would come to be trusted by the different states and the different systems that need it, and which could advise and guide our manufacturers and our breed societies.

In my visits to the Hong Kong Department of Agriculture, they told me that hardly ever did a British exporter go near them. Americans frequently came to see them. Attached to the American Consul in Hong Kong the Americans have a Department of Agriculture Official who is there specially to advise on the needs of Chinese agriculture and to help their exporters. I cannot but think that it would be money well spent to set up a practical body like this in order to look at the long-term future and association with this enormous and vital industry of agriculture in China.

I could go on for hours, but I think that I might become slightly unpopular. This is a very important subject. I believe that the small part that I have played in this debate drawing attention to agriculture is important. Agriculture is certainly very important in China and I should very much like the Minister to take serious note and a serious view of the problem.

7.24 p.m.

Lord Kadoorie

My Lords, during my maiden speech last October, I spoke of Hong Kong's unique value as a neutral point of contact between East and West, of Hong Kong's value to China and of Hong Kong's importance to Britain. On this occasion I make no apology for speaking again of these matters, for they are vitally important to the United Kingdom, to China and, of course, to all of us, the 5 million people living in Hong Kong.

The Hong Kong of today is, as I have said, a neutral point of contact between East and West: it is also a "service station" which enables China to regulate the flow of expertise required to fuel its Four Modernisations programme. The relations between China and Britain and China and Hong Kong are excellent—indeed, better than at any time I can recall. And it seems to me that full advantage should be taken of the present favourable climate.

Hong Kong's greatest strength lies in its economy and, to a considerable extent, in the facilities and expertise it can contribute to China's Four Modernisations. It is this mutuality of interest which must be encouraged, as upon this depends the confidence of local and international investors, so essential to good relations between Peking and London, and consequently to Hong Kong.

It must not be forgotten that the cultural revolution placed a virtual moratorium, lasting 10 years, on China's development, a time period which is all the more important in these days of rapid change. The determination of the People's Republic of China to make up for lost time creates an obligation and presents a unique opportunity both to Hong Kong and to the United Kingdom to participate in this endeavour.

Today, Great Britain, through Hong Kong, is being asked to provide management skills and the western technology necessary to assist China in its development programme. This is a grand opportunity which surely should not be missed; an opportunity for British industry and management to embark on joint ventures in China—to our mutual benefit.

Enterprises with China must be based on mutual trust rather than enforceable contracts, which made for difficulties for conscientious lawyers and accountants. And this "joint-venturism" unquestionably can best be carried out through Hong Kong, using local expertise and experience. Hong Kong is truly the gateway to China, as well as the gateway to South-East Asia.

In this connection, a new factor has arisen in that China has now established a number of special economic zones, by far the most important of which is that at Shum Chun, just cross the border from the New Territories. China's plans for this particular zone are ambitious. Basic facilities, including water, electricity, land and sea transport systems, as well as communications systems, will be completed shortly. Already some 1,000 joint venture deals have been concluded in the Shum Chun Special Economic Zone, of which three-quarters are being financed and managed by Hong Kong companies. Development is proceeding apace but this is only just the beginning: it is planned that by the end of the decade the population of the zone will number 350,000.

Adjacent Chi Wan Bay is to become a supply base for oil exploration in the South China Sea, with its first oil rig to arrive this year. To use a mechanical simile, one may compare this industrial zone to a machine where the gear wheels of industry have just started to turn. In the New Territories, the motors run faster and it is necessary for those in the industrial zone to be accelerated so that the transmission can mesh smoothly and avoid any crashing of gears.

In view of the importance of Hong Kong's unique position as a neutral point of contact between East and West, great care must be taken in the United Kingdom not to underrate the need to maintain and encourage that friendship and goodwill—built up over so many years—which bind Hong Kong's citizens to Great Britain. There is good reason for saying this, for I believe there is too little recognition in this country of Hong Kong's value to Britain. During the past few years orders from Hong Kong have created or protected, thousands of jobs for British workers. The shipyards of Scotland and the North-East, the electrical engineering factories of Lancashire and the heavy engineering works in the Midlands have benefited substantially from Hong Kong's predisposition to "Buy British".

When we planned the biggest power station in Asia it was to Britain that we looked to provide the generating plant—orders which, over an eight-year period, will amount to £2 billion and will provide some 7,000 jobs in the Midlands and the North-West. In the last two years Hong Kong shipowners have ordered 19 ships from British shipyards. We have spent over £400 million on British-made underground trains, locomotive and electrical installations; and Hong Kong's airline, Cathay Pacific Airways, has bought over £100 million worth of Rolls-Royce engines for its aircraft. Indeed, Britain exports to Hong Kong more than it does to Japan, or to India. It exports about two and a half times as much as it does to China. In other words—and astonishingly perhaps—Hong Kong is already Britain's best market in Asia.

Hong Kong is also the world's biggest exporter of garments, of watches and of toys: it has the third busiest container terminal in the world, which is second to none for speed of turn around. And it is also the third most important financial centre in the world after New York and London. Little wonder that people sometimes talk of the "Hong Kong miracle". I state these facts today, not to boast, but to underline the fact that Hong Kong's industrial revolution is still less than 30 years old. And yet, a generation after it took the first halting steps to find a new economic role, it is still the people of Hong Kong who are the key to its success.

The younger generations have inherited from the pioneers of the 'fifties their willingness to work, their enthusiasm to get on, to succeed. But if this spirit is to continue to flourish there must be hope for this younger generation that there will be a future for them; a future in which their hopes and aspirations will be realised. It is Hong Kong which provides the interface between the Occident and a quarter of the world's population—that is, China; destined, perhaps, in the next few years to become the axis upon which the world's most powerful countries will balance. In particular, the United Kingdom should remember that the goodwill between Great Britain and Hong Kong must be encouraged and not be put to too severe a test. I have in mind, in particular, the EEC/Hong Kong textile discussions which will start soon in Brussels.

Last year Hong Kong people were much concerned over the passage of the Nationality Act: and the harm that that did to good relations must not be underrated. I hope now that Britain—as a member of the Community—will do all in its power to protect Hong Kong's interest. After all, we must export before we can import: and so, if our importance as a market for Britain—indeed Europe—is to continue, we must retain access to our own major export markets.

Hong Kong believes in, and practices, free trade: it should not be regarded as a problem, but as an opportunity. If, then, Hong Kong is to continue to fulfil its present function as a neutral point of contact of benefit to both East and West, great care must be taken lest, due to a short-sighted policy, we create a situation where the liens of friendship, established over 150 years, are allowed to lapse and this British outpost in Asia to become a dead city buried in the pages of history.

7.36 p.m.

Lord Geddes

My Lords, not only are we all in your Lordships' House extremely grateful to the noble Lord, Lord Rhodes, for putting down this Unstarred Question but, really much more fundamentally, are we grateful for the untiring work that the noble Lord has put, and continues to put, into the whole subject of Anglo-Sino relations. Many noble Lords who have spoken, or indeed will speak tonight, took part, as I did, in what I think was the last debate on this subject instigated by the noble Lord, Lord Rhodes, in December 1978. On that occasion there were 18 speakers during a five and a half hour debate. Perhaps thankfully, there are slightly fewer noble Lords down to speak tonight, but their quality, not least that of the noble Lord, Lord Kadoorie, is in no way diminished. That is surely right and proper on a topic that is certainly of as much importance today, if not more, as it was three and a half years ago.

The noble Lord, Lord Rhodes, was kind enough to include me in his second delegation to the People's Republic of China in October 1979. Like the noble Lord, Lord Mackie of Benshie, I benefited enormously from that experience. In fact, in total I personally have now paid five visits to the People's Republic since 1977, and each time my views are reinforced. China is vast, both geographically and in population. There can be no doubt therefore, as has already been said and I am sure will be said subsequently, that its potential is equally vast. But, with the greatest respect to my Chinese friends—and indeed as the noble Lord, Lord Rhodes, himself has already said—there can be no doubt that the 10-year period of the Cultural Revolution at the very least retarded China's progress; a situation now slowly but surely being rectified through her programme of the Four Modernisations.

I make no apology for saying again that the potential is vast, awesome in power, and it is latent. China shows every sign today of encouraging outside contacts, a trait that I think we should do well to remember is very new in her enormously long history. Surely then it is in all our interests, both Chinese and British, to give maximum possible scope to exchange of views, be they political, economic. sporting and/or cultural, between our two countries, which must, as the noble Lord, Lord Kadoorie, has just said, include Hong Kong, in that Hong Kong has a foot in both doors.

Certainly my noble friend Lord Belstead—who, if I may, since I have not had the chance to do so before, I should like to congratulate on his changed and elevated status—will not, I think, be surprised at my making reference to Hong Kong, as Hong Kong is, if I may so describe it, a unique slice of salmon, surely the noblest of fish, in this delicately buttered sandwich.

The current excellent relationship between the United Kingdom and the People's Republic of China—and it is still excellent, despite recent reports of Beijing's adverse reaction to the Falklands situation—owes a great deal to the presence of Hong Kong, and particularly to the efforts of the recently retired governor, the noble Lord, Lord MacLehose, to whom we all wish a speedy recovery and whom we all equally very much look forward to welcoming to this House.

Despite Hong Kong's relative lack of progress in the Nationality Act, nevertheless Hong Kong is British. Like the Falklands, Hong Kong is a British dependent territory and its passport-holders surely have the status of British nationals—not citizens, which designates rights of entry and/or abode, but nationals—and I make no apologies for bringing that point again to your Lordships' attention, as the role of Hong Kong in Anglo-Sino relations is of extreme relevance and importance; 40 per cent. of the foreign earnings of China come through Hong Kong.

I have deliberately mentioned the Falklands in two instances—Anglo-Sino relations and the nationality of British dependent territories' citizens—and other than in those two instances, I do not consider (indeed, I go further and say I have no truck with the argument) that there is any parallel between the present Falklands situations and Hong Kong. The noble Lord, Lord Kadoorie, described Hong Kong as a service station. It performs a role totally different in Anglo-Sino relations and is totally different from the position which the Falklands Act occupies. It must be a close run thing as to which, of the People's Republic and Hong Kong, with their existing status, benefits the other more.

The problem, if indeed it is a problem, is the termination of the New Territories Lease in 1997. Beijing has said it is not a problem and that Hong Kong need not be concerned. Personally, I have absolutely no doubt that that is, and will continue to be, a bona fide statement. However, much play has been made that in July of this year Hong Kong will be within the I5-year barrier. While I do not subscribe to the paramount importance of that 15-year period, nevertheless it must be in the interests of China, Hong Kong and the United Kingdom that there be a resolution of the future status before too long, thereby maintaining the essential confidence of, and within, Hong Kong, which, again I submit, is as much in Beijing's interest as it is in London's. The more exchange of views there can be through and around the triangle of the United Kingdom, the People's Republic of China and Hong Kong, the better for all concerned. It is not easy to make good friends at the best of times. It is well nigh impossible if you have hardly met before.

Reference has been made in the past, and I am sure it will be tonight, to educational exchanges, and I warmly support any such concept. Indeed, artistically I will, if I may, use the forum of your Lordships' House to relay this evening an invitation from the Aldeburgh Festival to the Director of the Shanghai Conservatoire of Music to visit, and perhaps lecture or perform at, Aldeburgh. As I said in my part of the report following the October 1979 delegation to China, senior management in the People's Republic knows that it has to combat the educational gap created by the Cultural Revolution, which has resulted in a serious middle void. As an over-simplification, its managers, technocrats and artists are either over or under age.

As to Hong Kong—continuing my triangular theme —I again make a strong plea to the Government regarding educational home status for British dependent territories' citizens. Your Lordships will be aware that a report has been commissioned from the Overseas Student Trust on this question. That report, headed by Professor Peter Williams of London University, is expected shortly. What its conclusions and recommendations will be of course I know not, but I hope my noble friend Lord Belstead will not mind my pointing out to him a potentially curious anomaly.

Negotiations are presently in hand with a view to Portugal's entry into the EEC. EEC students are, I understand, educationally, given home status in the United Kingdom. Macao, just across the Pearl River from Hong Kong, is an associate territory of metropolitan Portugal. Thus, unless students from Hong Kong are given United Kingdom educational home status, the situation could arise where, for an identical year's course in the United Kingdom, a Hong Kong student—a British dependent territories' citizen—would pay anywhere from £2,000 to £6,000, whereas his opposite number from Macao would pay only £400, surely a manifest absurdity.

Three and a half years ago, in a debate initiated by the noble Lord, Lord Rhodes, I deliberately concentrated my remarks on China and referred to Hong Kong only in passing. On this Occasion, if only to redress that balance, I have equally deliberately concentrated on Hong Kong to emphasise the point that in any discussion on Anglo-Sino relations, Hong Kong is a vital link. Our relationships with the People's Republic becomes more important by the day, and the only way to build up a good relationship is to gain the crucial elements of trust and understanding between two great peoples of such differing political, cultural and educational backgrounds. I warmly applaud the tremendous efforts of the noble Lord, Lord Rhodes, in that context, and sincerely hope that my noble friends on the Government Front Bench will pay close heed to what he and other noble Lords are saying this evening.

7.48 p.m.

Lord Bowden

My Lords, I wish to begin by thanking the noble Lord, Lord Rhodes, for initiating this debate and making it possible for us to discuss what is a remarkable and important subject. Particularly I wish to express my thanks, and I am sure the thanks of the whole House, to the noble Lord, Lord Kadoorie, for the wonderful account he gave us of the achievements of Hong Kong, of which he is such an important citizen. We in this House are privileged to have him among us. We welcome him whenever he cares to come to see us and we realise the enormous influence he has in his home country and the tremendous help he has given to the fostering of trade between Hong Kong and this country.

This is an important debate because of the enormous importance to the world, and particularly to ourselves, of our connections with China. When I was a student at Cambridge 50 years ago, I met a Chinese scholar, a physicist, who was working in the labs with me and we talked together quite often. He said to me, "Throughout recorded history, for 3,000 or 4,000 years, China has led the world in science, the arts and manufacture. There have been a few periods in which other countries have temporarily taken the lead, and we are in one of them now. But", he said, "you will probably live to see the day when China reasserts her position as the leader of the world in many of the most important subjects in art, in science, and in manufacture". I have never forgotten that.

He went on to tell me that when the tea clippers used to go to buy tea and race home every year—as your Lordships might recall—they could not export goods for the tea. We had to pay in gold because there was nothing that England could then make which the Chinese could not themselves make as well or better. So if it is believed that Chinese industry is backward, it must be remembered that it is a very temporary situation and it is unlikely to persist for long. The Chinese have an immense tradition of very great technical skill, and those of their people whom I have met—I met them only once when I was with the noble Lord, Lord Rhodes—seemed to me to be as competent, as intelligent, and as industrious as any men whom I have ever met in my life.

Since the subject of cultural contacts and in particular educational contacts have been mentioned, I should like in the brief time for which I think I should speak to concentrate on that. I am very glad that the absurd situation about the possible preferential treatment of students from Macao as compared with those from Hong Kong has already been raised. This seems to me to be outrageous. I should like to speak for a few moments about my own experiences when I was in the University of Peking with the noble Lord, Lord Rhodes. First of all it became obvious to me that the Chinese had, for the time being at least, an exaggerated impression of the importance of some of the work which was being done in England. They said to me, "We ought to have courses in industrial management, like yours, and like those at Harvard, for example". I said, "About a thousand years ago an emperor of China deployed a million men to take a canal over a range of mountains from the Yangtse to the Yellow River. These men had to be deployed, fed, housed and provided with tools, the site had to be surveyed, the work had to be organised, and this was", I said, "as great an exercise in large-scale management as the world has ever seen. What can we tell you? You have known it for a thousand years. You should", I said, "rediscover your own achievements, analyse them, and tell us".

Then we got on to the subject of inflation and it became obvious that they had managed to keep down inflation from 1951 to 1971 (the years for which they had the figures) to a total of 2 per cent.—2 per cent. altogether over 20 years. We have been averaging, 5, 10, 15 per cent. throughout that time. How have they done it? Well, they had in effect indexed the Yen to a very simple index based on only five commodities. They were, rice and millet (which are their principal grains), cooking oil, fuel and cotton cloth. No self-respecting economist in the West would dream of using so crude an index as that upon which to base the value of the currency; it is ridiculously inadequate. On the other hand, no western economist has ever had to try to stabilise the value of money over an area, and for a population, as great as that of China where, as the noble Lord, Lord Rhodes, has already reminded us, there are more than 1,000 million people. They are doing a very complicated and very sophisticated job in an extremely simple way. I said to them, "You should study your achievements, and tell us more about them".

The question then arose of the future of Chinese industry. I said to them, "You have an example of the most sophisticated developments of manufacture in the whole wide world on your doorstep in Hong Kong. You can study that. There is very little that we can tell you. In fact we would like to learn ourselves how the people in Hong Kong have been so triumphantly successful and have outclassed us". I went on to say, "China has many examples of achievement on her doorstep which we would do well to emulate and which you yourselves can study and report on for us".

However, there was one thing which they wanted to study which obviously they did not have—computing and computers. They were using a very crude series of machines which we might have had 20 or 30 years ago. Soon after I returned home a friend of mine went out to give some lectures. He said that he had audiences of hundreds and hundreds of students, all anxiously trying to learn, and it was perfectly evident that they would like to study the subject, either with the help of western lecturers or by coming to England.

We then got on to the question of the extreme difficulty that the Chinese now have in paying the fees of students back home in England. The ordinary fee that is charged to a Chinaman is about equal to the sum of money which two or three familes would have to live on throughout a whole year. I think it is most important that we should try to help them in whatever ways we can, but that we should very humbly sit at their feet and learn from them the things that they can teach us because of their enormously long tradition and their experience of subjects so numerous and so different.

It turns out of course that it was the Chinese who first had printed money. It was they who discovered that if you print too much money, prices go up. It was they who discovered that if prices go up too much, it causes unrest and social catastrophe to such an extent that one of the worst periods of inflation that they experienced after having printed too much money was so awful that the peasants had to sell their children as slaves in order to keep body and soul together. That gave them a feeling that inflation must at all costs be cured, and that you must not print too much money. All of these things are deeply rooted in the Chinese tradition. They understand these things, and there is very much that they can teach us about things which concern us, and some of which we are still struggling to understand.

The noble Lord who spoke about farming did something like justice to the extraordinary beauty of the countryside. It is due to the fact that the Chinese are concerned not so much with the total product per man, but the total product per acre. They are prepared to use more people if the same land can thereby be made to yield more crops and in some parts of China they get as many as three or four crops out of the same piece of soil in a year. They are fully aware of the fact that unless they maintain their tradition of farming, and if they were very greatly to mechanise their agriculture, the problem of coping with the then unemployable young would pass their capacity, since after all there might be several hundred millions of them. Their problems are on a scale that is enormously larger than anybody else's and they seem to me to show the most extraordinary good sense in the way in which they are tackling them.

In terms of their political alignment it is true to say that they fear the Russians and that they are very much more on our side than they are on the side of the Russians. They are, I believe, well disposed towards us. It has always been my experience, in speaking to the Chinese, that they have the same basic processes of thought that English people have. In other words, they are empirical. They are not philosophers, in the sense that we are not. They do not go in for any sophisticated abstract process of reason, but they do have the same empirical, sensible approach to long-term problems that we like to think we have. They are an enormously cultured, cultivated and sophisticated people.

They are a quarter of the population of the world. They have it in their power, I suspect, to become leaders of the world in many ways within the not too distant future. It would be most extraordinarily foolish of us if we did not seize all the opportunities that there are and make the most of the chances that we now have, thanks to the enterprise of, among many other people, the noble Lord, Lord Rhodes, and thanks also to the help which has been given through Hong Kong by the noble Lord, Lord Kadoorie. To speak briefly about China is absurd. Nevertheless, one must be brief. But the hour is late and the opportunities are great. With that observation I think I had better finish.

8.1 p.m.

The Earl of Bessborough

My Lords, with other noble Lords I am most grateful to the noble Lord, Lord Rhodes, for putting down this Question for debate this evening. Whatever he may modestly say about himself, I think I am right in saying that apart from the noble Lord, Lord Kadoorie, he is as knowledgeable about China as any other noble Lord in this House. I liked what he had to say, particularly about longterm thinking. This seems to me to be essential, and it should be central to our economic policy vis-a-vis the People's Republic. I agreed with him, too, that surely 1,000 million good Chinese cannot all be wrong.

The noble Lord, Lord Rhodes, has visited the People's Republic several times. I have not been there since I went there as a Member of the European Parliament and was in Peking at the very time of the return of Deng Xiaoping. That was an exciting time, and the enthusiastic celebrations in Peking, lasting for some days, had to be seen to be believed. I think that since the return of Deng Xiaoping the prospects of an understanding and of greater economic co-operation between the Western European countries and the People's Republic have been more promising, but it all takes time.

I am sorry that the noble Lord, Lord Kennet, who put his name down on the list of speakers for this afternoon, has not in fact spoken in this debate, since, with him, I took part in a debate in the European Parliament in March 1979, and I said then that I agreed very much with what he had said on the subject of the trade agreement which was signed by the European Community and the People's Republic on 3rd April 1978. I also agreed with what he said about buy-back projects, and about the prospects for further buy-back projects. It seemed to me at the time that this trade agreement was of great importance, and I know that it was welcomed by the People's Republic, whom I sometimes think are even more strongly in favour of a truly united Europe, economically as well as militarily, than perhaps we are ourselves. We can well appreciate the reasons for this; and the noble Lord, Lord Bowden, has just indicated them.

I feel it is not inappropriate, since Her Majesty's Government in the United Kingdom are members of the European Community, one of the very largest trading blocs in the world, for me to ask my noble friend Lord Belstead (whom I, too, should like to congratulate on his elevation to the Foreign and Commonwealth Office) what the position is in regard to this EEC-China agreement, as I think we should support not only a maximum exchange of views between this country and the People's Republic but also between all member states of the European Community and China.

I should particularly like to know whether the Joint Committee working parties in different industrial sectors have now been set up within the terms of Article 9, paragraph 3, of the EEC-China trade agreement; and in that connection I would not hesitate to refer your Lordships to what I said in my Motion on the European Communities and China in a debate on 30th November 1977. I would not vary one single word of what I said then. Lord Mackie of Benshie spoke of co-ordination on a national basis. I believe this should be extended, so far as is possible—and it will be within certain limitations—to the EEC in various industrial sectors, and not only in connection with the students, which my noble friend Lord Geddes mentioned.

I will not go into all the detailed points which I made in the debate in 1977 and on subsequent occasions, both in your Lordships' House and in the European Parliament, but I should be interested to know whether my noble friend Lord Belstead has anything he feels he can usefully say this evening on the progress which the Commission, and I think particularly Commissioner Haferkamp, may have made in implementing the terms of that agreement.

I should like to join with other noble Lords, I am sure, in saying how much we must all welcome the appointment of Sir Edward Youde as a most able successor to that admirable governor of Hong Kong, Sir Murray MacLehose. When I was in China Sir Edward was then the ambassador, and I know what an admirable job he and his staff did in our embassy. I had with them long discussions on industrial development in China, having visited the principal industrial areas in Heilungkiang and other parts of Northern China, as well as the famous Taching oilfields, which of course export oil to Japan.

Your Lordships will have seen that China has now promulgated the oil exploration blocks she is intending to develop, and has called for tenders. It is very encouraging that the People's Republic has also given assurances about the settled nature of her policy towards foreign businesses. I understand that some British oil companies have put in bids; and, of course, I would add that British expertise in this area is very well known. Can my noble friend confirm that the Government will give all possible support to any British companies tendering, so that this country can play a major role, in co-operation with the Chinese, in the development of their resources, not only in oil but in other raw materials in which the country, as I know, is very rich? In view of successful developments in the field of aviation co-operation, I would be interested to know what steps the Government are taking to pursue further joint co-operative ventures in other areas of advanced technology.

As it is late, may I just say again how grateful I think we should all be to the noble Lord, Lord Rhodes, for raising this matter this evening. I certainly agree with him that there should be a maximum exchange of views between our two countries and Western Europe as a whole at all levels.

8.10 p.m.

Lord Oram

My Lords, two months ago I had the great good fortune of being selected as a member of the delegation from the Inter-Parliamentary Union which visited China at the invitation of the National People's Congress. Let me say at once that I am always wary of those who, on the basis of a two weeks' visit, become experts in a country's affairs. I do not wish to fall into that trap. My noble friend Lord Rhodes, with his great experience to which a number of noble Lords referred, himself said that he was no expert. All that I can say is that his knowledge and experience in these matters completely dwarfs my own. Nevertheless, the experience that I gained during that visit to China was so meaningful, and so contributed to my own understanding of the situation in China, that I am persuaded that at least a brief contribution from me to this discussion may be worthwhile.

My noble friend's Unstarred Question refers to the need for, "the maximum exchange of views between the two countries at all levels". The delegation from the Inter-Parliamentary Union was in itself a very considerable step forward in this respect because China has not hitherto been a member of the Inter-Parliamentary Union. It is in my view highly desirable that she should be, and I hope that our visit will have brought nearer the day when she will be joining that organisation. I believe it true to say that such membership simply awaits a decision by the National People's Congress in the autumn. Certainly I am sure that from the point of view of noble Lords such an application will be warmly received.

Moreover, I believe that other exchanges and membership by China of other international institutions will become increasingly possible in the near future and increasingly desirable. These exchanges will not be simply on the educational and cultural level, with which my noble friend Lord Bowden has been dealing so effectively, but, I believe, on the level of exchanges between businessmen, scientists, trade unionists and, if I can refer to my own special interest, co-operators within the international co-operative movement. All, I believe, will increasingly find opportunities of mutual understanding and association with their opposite numbers in the great country of China.

If I may give an illustration of a favourable development in this respect, a few years ago a number of us both in another place and in your Lordships' House formed the Parliamentary Group on Population and Development. We knew then that China not only had an enormous problem in relation to population growth but had a most important experience in dealing with that problem. It was not easy for those of us who were then forming this parliamentary group to make sufficient direct contact with the Chinese in this matter, but since then there has been a most welcome development in this respect.

Last autumn in Beijing the Chinese were hosts to one of the most important international conferences on the subject. Arising out of that conference, there has now been formed an Asian parliamentary group concerned with methods of reducing the birth rate in the continent of Asia; and the Chinese have taken a leading part in forming that group. So there are, as I have suggested, in many areas increasing opportunities of mutual exchange and mutual understanding.

These changes in China's international position are paralleled by changes that are going on internally as well. I suggest that it behoves all of us who are interested in a closer international association with China to try to understand the nature of that internal change. I will give just one example. During our visit I was able to put certain questions in an interview we had with deputy Prime Minister Yao Yilin. Incidentally, I have been interested to read since our return that there has been a structural change in the government set-up, and whereas previously there were some 12 or more deputy Prime Ministers there are now only 2; and I was glad to see that Mr. Yao Yilin is one of those two. So we were talking to a man of considerable significance.

I had asked him during our interview about the significance of the so-called new policy of personal responsibility in economic affairs. During the various visits that we made to industrial and agricultural enterprises we were given evidence of how this new policy is working, and successfully working, in terms of productivity. In discussing this, I was particularly interested to hear how the deputy Prime Minister, when referring to the Chinese system of agriculture in the communes, stressed that the new developments, significant though they were, would not lead to an abandonment of collective ownership of land. Changes are taking place in the role of the communes and in the freedom of the peasants within the communes to make decisions about their work patterns and the general running of the enterprise, but this should not be seen as putting the clock back. It should be seen in the context of a continuing reliance upon collective ownership throughout China.

There is another economic development that is going on in China, about which I was able to make some inquiries because it was of particular interest to me. We in Britain are these days faced with the problem of young unemployed in the cities. One method of tackling this problem, with which I have been involved in this country, is the encouragement of workers' co-operatives to provide jobs for groups of young people. I found that there was an almost exactly similar situation in the Chinese cities. They did not refer to unemployed youth; they rather used the euphemism of "youth awaiting employment"—but I think it came to much the same thing.

There was evidence of a growing movement in the cities of workers' collectives, which is very familiar to the incipient changes here. I feel certain, therefore, that this is one area where mutual exchange of experience would be useful in this particular case in the service industries, in handicraft and in retailing. Particularly in relation to the problem of young unemployed there would be a great deal of value in sharing experience between our two countries. Those are two of the lines of inquiry that I was able to pursue and which I thought would be of some interest to your Lordships.

In conclusion, may I—as others have done—thank my noble friend Lord Rhodes for the opportunity that he has given us of having this brief discussion. I should like to assure him that in our many discussions that we had in China during our two weeks' visit his name was often mentioned. He can be quite sure that his work for British-Chinese understanding is very greatly appreciated among the Chinese, as it is in your Lordships' House.

8.20 p.m.

Lord Fulton

My Lords, in the three decades since 1949 China has been through a time of upheaval and struggle, the world has watched a human drama that has engaged a quarter of the human race in which the heroes of one act became the villains of the next with extreme dogmas fighting bitterly against one another, sometimes Left against Right; sometimes the high command against the rank and file. Yesterday's top people humbled and brought to justice; high hopes and idealism alternating with deep frustration and earthy pragmatism.

Through it all it is possible to see a main thread. One percipient onlooker has described it thus: A persistent search for a Chinese road to economic development, nation-building and social reconstruction. The path proves to be lengthy and tortuous: every corner it turns reveals conflicts of ideology, clashes of personality, struggles for power and massive social upheavals". Those of us who were privileged to join the noble Lord, Lord Rhodes, in his pioneering bridge-building between Peking and Members of your Lordships' House and the other House found in him an ideal leader. He was full enough of years not to be misled by romantic illusions that progress in relations between East and West would be instantaneous, miraculous and uninterrupted.

He had seen enough of men and affairs to read the less obvious signs on the road that escaped the notice of others. His down-to-earth empirical English common sense clearly won the hearts of his hosts. Ever since that first visit the conviction has stayed with me that the outcome of China's decades of stress was of the first importance for us, far away at the other end of the earth. Not only because it engages a quarter of the entire human family, with all that that implies—with all that the outcome of that stress implies—and inevitably means for the world's security and for the hope of striking a satisfactory global balance in the years to come between the claims of food, raw materials and industrial development. Not only because of the weight of the vast numbers involved, but also because China's future course will be that of a people proudly looking back beyond a recent century and more of invasion and humiliation at the hands of the West and latterly Japan, looking back upon the thousands of years of the longest continuous civilisation in human history.

This perspective and time-scale must be emphasised. It may be tempting but surely superficial to see in today's China only a new emergent super-power interested primarily in catching up a quarter of a century's time lag in technology. What model of human association will she offer the 21st century? The world has watched, and in different degrees admired and emulated, the model of a good society first glimpsed by the Pilgrim Fathers and set forth in the American Declaration of Independence and given flesh and bones during the subsequent 200 years while the US has harnessed science to the tasks of providing its own people, and others often with open-handed generosity, with food in plenty and a growing stock of the material goods of life.

Have they any cause to quarrel with or question the fulfilment of the promise of liberty and opportunity? Other models have been up for appraisal. The model of the Russian revolution, now over 60 years on; and Europe with its composite kaleidoscopic culture buried deep in the long and buried history of its national components. What patterns will a more extrovert China offer to a world divided between North and South, rich and poor and all the variations of those themes?

To return to China as our delegations found it, I leave the great and pressing issues of economics, industrail and agricultural development in the experienced hands of the noble Lords, Lord Rhodes, Lord Kadoorie—whom I should like to join in welcoming back to his seat tonight and for giving us the opportunity to share in his wisdom—and also Lord Mackie of Benshie.

For my part, I was most fortunate that two years after the first Rhodes delegation in 1978 I received an official invitation to go with my wife to China again as the guests of the University of Peking. I believe that that invitation was given chiefly because of my longstanding connection with the Chinese University of Hong Kong. I must say a few words to the House about that interesting institution, assuring noble Lords that it is closely relevant to the subject of the Question of the noble Lord, Lord Rhodes. Hong Kong has now two universities, one on which time does not permit me to dwell which was founded 70 years ago on the model of contemporary civic universities of the United Kingdom, sharing many of their characteristics and all of their virtues. Its medium of instruction was, however, English.

The second university, the other university, was founded nearly 20 years ago with two main objects in view: first, by teaching through the medium of Chinese it was intended to redress the balance of disadvantage suffered by the many young men and women of Chinese parentage whose education had been gained through the medium of Chinese in the Chinese middle schools of Hong Kong, and whose natural abilities, however high, could not ensure them a university education in the existing university.

Sir Robert Black, the then governor, in an inspired moment of vision, and with the backing of the Colonial Office (whose education service was vastly experienced in the provision of higher education in the British colonies and dependencies against the coming of their independence) and of the Inter-University Council, the foster parent of some 40 universities in Africa, the Caribbean and in South Asia, was convinced that the second university was overdue.

The second objective which lay behind its foundation was that it should provide a meeting ground for the Chinese traditions of scholarship in Hong Kong, South East Asia and mainland China, together with the traditions of Western Europe, and also with the American university tradition, enriched as it had been at the highest level by the contributions in both science and the arts from numerous Chinese scholars who had settled in the United States. Thus, the Chinese University of Hong Kong had bred in its bones, as it were, the aim of promoting understanding between East and West.

I had the great privilege of being chairman of the commission which was set up by the Government of Hong Kong to report on the prospect of bringing together three post-secondary colleges—refugee institutions from mainland China which had set up centres of study in Hong Kong. They represented a wide range of university traditions from the classical Chinese scholarship to Christian colleges. We recommended that the union should take place and that the university so created should preserve its collegiate character and that its teaching should meet the needs of children of Chinese birth. Our report, of course, dealt with the range of academic issues normal in the institution of a new university, which do not concern us tonight.

I have been privileged from the start to be a member of the Chinese University's governing body and the university is fully conscious of its debt to my fellow member, Lord Todd, for his help and advice from the eminence of his position in the world of science. It is perhaps sufficient to say that the new university has filled its first 18 years with splendid achievements and is living up to the high hopes of its founders. It has had two vice-chancellors—both Chinese by birth—in the one case with strong links with the United States and, in the other case, to the United Kingdom. It has manifestly strong support in Hong Kong, not only from the Hong Kong Government but also from the Chinese community.

During more than half its life it has had as chancellor, Sir Murray MacLehose, who has even-handedly been chancellor of both universities. He will be greatly missed in his retirement from an illustrious term of office, during which he has guided Hong Kong through massive changes of scale with high political and administrative skills, his deep understanding of the complex cross-currents of Hong Kong's teeming life and an unassuming natural dignity. Hong Kong's loss, however, will be your Lordships' gain as he joins our deliberations in this House in the near future.

It was against this background of higher education in Hong Kong that I went for a second visit to China. I will not take up the time of the House by describing their interest in academic affairs, but I would wish to describe the kindness of academic hosts in Peking and other university centres. They, too, have problems of access to universities which we share—problems of teaching, research, libraries and relations with students.

Over and above these, two impressions stand out in the memory. There was the impact upon the senses and imagination of the excavations of Sian, the old capital of China—the army, thousands in number, of terra cotta horses and riders, each individual soldier and animal individual in its features, entombed at the approaches to the tomb of the Emperor who first unified China, contemporary with the classical age of Greece and Rome in the Mediterranean, facing the direction from which an enemy might threaten. The tomb itself awaits excavation in due course. Already the discovery must rank among the greatest of nineteenth-century discoveries in the Mediterranean and the Valley of the Nile. The meticulous care and the strictness of the control to ensure orderly access are a witness to the national pride in the artistic achievements and the superb craftsmanship of a bygone China.

Nearby the oldest known human settlement has been excavated and it bears witness to the inherent inventiveness and aesthetic propensities of the remotest Chinese ancestors. Everywhere there are museums, beautifully organised and laid out, illustrating the history of Chinese society and its art. Their effectiveness may be read in the signs of eagerness on the faces of country-folk, old and young, who quickly gather round at the approach of visitors to the numerous lesser imperial tombs. They catch the words of guides before the interpreter passes on their content to the fortunate spectator from overseas.

Inevitably there broods over the scene the question of how the gigantic states can manage themselves if they are to succeed in meeting the challenges of nature or even those arising from man's own inventiveness. Men must act together or they may perish together, but the scale by which they are organised becomes one of the great problems of human government. There are signs that give ground for hope, but that is for another day.

In the meantime there was one significant straw in the wind. I was naturally interested, when in Peking, in finding out what would be the official response to overtures for academic collaboration between the universities of China and those of Hong Kong or, for that matter, of the United Kingdom. The Minister of Education responded by putting aside the question in its most general form but stating that there would be a welcome for academic exchanges between Hong Kong and the universities in the province of Canton, including the university founded by Sun Yat-sen. This seemed to be a most encouraging and hopeful reply, and I have since been glad to hear from the vice-chancellor of the Chinese University of Hong Kong that various exchanges have now been arranged.

There are now indications that the recent decision of the Chinese National People's Congress to establish special administrative regions will allow a promising measure of co-operation in industrial and other relationships. I hope I am not thought to be naïvely suggesting that mutual understanding between peoples and cultures long cut off from one another can be turned on by a mere declaration of intent.

I end with a plea in support of the noble Lord, Lord Rhodes, and his endeavours, because I believe that wider understanding between nations and other groups is best promoted by bringing together people who already have interests in common—politicians with politicians, yes; doctors with doctors; musicians with musicians; scientists with scientists; engineers with engineers; and, above all, students with students—

Lord Davies of Leek

And teachers with teachers.

Lord Fulton

My Lords, universities by their nature and organisation, are naturally equipped to perform such a function. I have referred before in this House to the example of one of the great experiments of this century—the foundation by another Rhodes of the Rhodes scholarships, which brought together young men from all over the Commonwealth and the United States to study in Oxford, not in order to love one another but to understand one another, by doing something in which they had already engaged their activities and minds. I believe that after three-quarters of a century the numbers of those people occupying positions of responsibility all over the world have done a great deal, and, in particular, I am certain they have narrowed the Atlantic as much as has Concorde itself. It was working together with others from a different part of the world, and with a different upbringing, at subjects or jobs in which they were already interested, that led, if not to a growth in mutual affection, at least to an understanding of what made the other parties to the arrangement what they were.

It is not far-fetched to claim that that single inspiration is one with which the noble Lord, Lord Rhodes, agrees, because, if I remember rightly, the first thing he did when he arrived back in England from his first pioneering bridge-building, was to arrange for a very promising girl musician, whom we had heard at one of our stops, to come and continue her education in company with English girls in Manchester, as a renowned centre of musical studies. Therefore, I think that he agrees with this, if not with the way in which I have said it. He himself had the knack—amounting to a kind of genius—to sense what the various hosts in China would be interested in. Once that was in the open, what might have been merely a formal exchange of courtesies became an animate human relationship and we need more of it.

8.42 p.m.

The Earl of Gosford

My Lords, I did not put down my name to speak tonight, but as a couple of speakers have dropped out I am tempted to tell, in a very brief manner, a very short story which is dear to my heart as an artist and a member of the Artists' Union. I should like to thank the noble Lord, Lord Rhodes, for giving me this opportunity. He said that he knows little of Chinese matters, but leading four delegations to China is certainly four times more than I have been to China.

I should like to add to the list of the noble Lord who has just spoken, artist to artist. Last year, I had occasion to meet an associate professor in the oil-painting department of the Central Institute of Fine Arts in Peking, who was over in London to copy some European paintings in the Tate. This is no mean feat. I arranged for him to visit the schools at the Royal Academy of Arts and the Royal College of Art. In conversation at the Royal College of Art, I learned of one area of China's treatment of artists from which we should surely learn. In the institute of which he was an associate professor, there were equal numbers of artists and teachers. The teachers were employed full-time from year to year, and every other year they would take a sabbatical to carry out their own art work. This, at a time of cuts in this country which affect very greatly indeed artists who rely on part-time art teaching to continue their work and to have close co-operation with their students, is a lesson well learned.

8.44 p.m.

Baroness Llewelyn-Davies of Hastoe

My Lords, I think that every speaker tonight has said how very grateful the House is to my noble friend Lord Rhodes for having initiated this debate, for making so powerful a speech himself and for giving us the opportunity of hearing such highly qualified experts as the noble Lord, Lord Kadoorie. China's importance in the world context is immense and it is curious that our debates about her are so infrequent. China has had a cultural and philosophical influence on the world for thousands of years, and trade with China has been of historical importance for almost as long. She has an infinite variety of peoples, whose ingenuity and skills have been legendary for centuries and yet modern China, until very recently, has loomed only like a kind of mysterious question mark in the minds of most of the British people.

That is one of the reasons why I think that Parliament, and indeed the country, owe so much to the generosity and the determination of my noble friend to forge links not only with the Chinese Government, but with the Chinese people. Friendships, constancy and trust, as the noble Lord, Lord Kadoorie, told us, are particularly valued by the Chinese people, and anyone who has been there with my noble friend Lord Rhodes knows the depth of the trust and admiration in which he is held there.

I learned from my visit that, apart from the fascination of its culture, the beauty of the country, the vigour and originality of its people, China is in no sense, as some people imagine, a closed society. It is, for instance, nothing like Russia. People come up to talk to you in the street quite spontaneously, if they hear you speaking English, and then join in the conversation vigorously, whatever their particular skill, because they love to try to speak and understand our language. Students everywhere flock to you at once when they know that you are a foreigner, and ask questions about our schools and universities. They long to know the most intricate details about British political life.

I remember with some discomfort a rather rough plane journey that I had between Peking and Hangzhou. I was cross-examined by one of our young interpreters about exactly what were the details and functions of the National Executive Committee of the Labour Party, and exactly what the decisions at that year's Labour Party's Conference meant. It was rather difficult, as your Lordships can imagine! Later on, one of the Conservative members of our delegation was collared about the 1922 Committee, and asked in detail what was its significance and position in the Conservative Party. In China, there is a passionate interest in the world outside, and I shall come back later with some questions for the noble Lord who is to reply.

For our part, I wonder how many—even Members of Parliament—know that the Chinese have just unveiled a new draft state constitution, which is their fourth since 1949. At this stage, most interestingly, it has been issued for discussion and comments by the people. This means that now Chinese political thinking will be concentrating on some very basic issues. This is not the time to go into details. Noble Lords will know that the constitution contains a master-plan radically to reform the structure of the Chinese Government and the Communist Party. It proposes to establish a state presidency and a Central Military Council responsible to the National People's Congress, rather than to the Communist Party, and there are radical new proposals for the people's communes.

Constitutional changes may well come from the strengthening of legislative bodies at all levels, including the National People's Congress. Furthering Deng Xaio Ping's general approach over the last years, the Constitutional Revision Commission is reported to have recommended a general devolution of political power, so that "grass-roots levels" have far greater power over both administrative and economic affairs than they have now. There has been very little discussion in the British press about so important a development, yet we here ought to be able to follow the discussions in China about a new constitution which will be as important to the world outside as to China herself. We do not know enough, in general, about the workings of state, the People's Congress and the pattern of internal Chinese political life to assess what will be the impact of these proposals. This is why my noble friend's approach to a constant exchange of views,of personnel, of technical expertise and of mutual dialogue is so important. We can only interpret such views if we have far more information, not only at Government level but at all levels.

Apart from the human understanding which is so necessary, it is of real importance to our practical relations with China. The members of the Chinese Government—and very high ranking members of the Government—who met us on our various delegations, with great frankness told us that they knew there were difficulties. In trade matters, for instance, they knew that, as in all countries—but particularly, perhaps, in China because of its recent rather tragic history—there are often almost inexplicable delays and confusion even when both parties are anxious to get agreement on projects and joint ventures. Again, what is needed here is familiarity with each country's methods and problems, and that can only he achieved with deliberate efforts on both sides and with assistance from Governments.

As my noble friend Lord Rhodes has said, it is essential that our mutual trade interests prosper. In this connection, each time I have visited China I have been made aware from all sides of the almost desperate need for the exchange of technical know-how and training. Like other noble Lords, may I ask the noble Lord, Lord Belstead, whether we can make any new efforts in this direction? Is there any hope, for instance, of help for young Chinese men and women to come to this country to be trained? When we were there three years ago that splendid old warrior of the Long March, Vice-Premier Wang Zhen, asked us if it would be possible for them to come to this country and work, perhaps, with technicians in the North Sea Oil Field, or to work and study dairy farming—of which they need much experience—on British farms. I wonder whether the noble Lord could give us any indication of hope in that direction.

Another question of real importance which has been raised many times in the House, and of which I have given the noble Lord notice, is the need for the transmission of the BBC World Service to be stepped up so that it is properly audible in China. We know that this requires a new transmitter because the one at Singapore is inadequate, and we know that the Government have some intentions in this direction. But, my Lords, it has taken a very long time. Every time I have visited China our interpreters have pleaded with us to get this service improved. They listen to the Voice of America every morning because it is audible, but they would much prefer the BBC both because of the programmes and because of the quality of the English. I should like to ask the Minister what progress has been made in this direction.

Another subject which has been discussed over and over again, and which I am very glad the noble Lord, Lord Geddes, raised, is the tragic results of Government policy on overseas students. As a small example of this, on our last visit we met a highly intelligent young man, the son of a distinguished Chinese writer who had lived in England years ago and who had brought his family up to love the British way of life. More than anything else in the world they wanted that young man to come to a university in the United Kingdom. But, of course, we found that he could go to any one of the leading American universities for half the sum it would cost him to come here, and to his infinite disappointment that is what he had to do. Could we plead with the noble Lord to try to influence his colleagues in Government and in his department to mitigate this absurd situation which applies to students all over the world and which is so damaging to this country.

This is not an appropriate occasion to consider wider political issues, but naturally western countries speculate about China's relations with Russia and with America. Noble Lords will know that Japan and the NATO countries have been urging the United States to try to resolve the difficulties created by their arms policy towards Taiwan. We also know that the sale of grain from the United States is essential to China, and we welcome Vice-President Bush's statement that he "felt good" after his three-day visit. It is essential that we draw China more and more into the community of nations. We naturally wonder, too, what Mr. Brezhnev's recent olive branch to China really means.

Lord Davies of Leek

My Lords, would my noble friend consider it to be wrong of me to interrupt her? I wish to support her just for one minute. Travelling by train from Peking to Hanoi on one famous occasion, a nice old gentleman spoke to me in very good English. I asked him where he was going. He said that he was going to Wu-an where they were building a new bridge over the Yangtse when they were friendly with the Russians. He said that he was an engineer, that Mao had called him back and that he was 70-odd years of age. I asked him where he studied engineering. He said, "In the best place in the world—Imperial College of Science, London, in 1910". We have thrown all that away. Therefore, I want to enhance and back up the point which has been made by my noble friend.

Baroness Llewelyn-Davies of Hastoe

My Lords, I agree entirely that it is a very good example which my noble friend has given us. I shall not go too far into the question of the olive branch, but perhaps the Chinese might be forgiven for being a little cynical about the timing of the olive branch just when there were strains appearing between America and China over the Taiwan policies. At this moment, as the noble Lord, Lord Geddes, mentioned, we are naturally sad that the Chinese Government could not support Resolution 502 at the Security Council, but we understand their loyalty to the views of the non-aligned countries and we share their strong wish for a peaceful settlement of the Falklands dispute. But our debate tonight is taking place under the deep shadow of crisis. These are questions which we must leave for a different occasion, but what we want to convey tonight is our tremendous goodwill towards the People's Republic and our strong wish for friendship and for further exchanges of views and interest at all levels.

Lord Morris

My Lords, before the noble Baroness sits down, this is a terrible impertinence but I must rise for a few moments to support the point she made regarding the External Service of the BBC. When I was in China only last January it was astonishing to me—although I did know, in fact, that this was so—that the Russians had been broadcasting for many years to the Chinese in English, with an astonishing audibility and very close to the frequency upon which the British broadcasts are transmitted. It is absolutely essential that the valid point which the noble Baroness has made should be supported by Her Majesty's Government.

8.58 p.m.

The Minister of State, Foreign and Commonwealth Office (Lord Belstead)

My Lords, the Government are particularly grateful to the noble Lord, Lord Rhodes, because we attach the highest importance to relations between the United Kingdom and the People's Republic of China. May I join with the noble Baroness, Lady Llewelyn-Davies, in also recognising the really splendid speech which the noble Lord, Lord Rhodes, made from the considerable amount of experience which he now has of this subject.

Despite the great geographical distance between our two countries, our historic ties have been close. In 1950, Britain was one of the first countries to recognise the People's Republic of China. Ten years ago we agreed to exchange ambassadors, and particularly since then our relations have developed rapidly. Our social and political systems are quite different. Nevertheless, on a number of major political issues which divide the world today we and the Chinese share the same fundamental outlook. The Government believe that continuing to develop the exchange of views with China can promote mutual understanding, which will be in the interests of both countries and in the interests of world peace.

In the last few years there has been a great expansion in the contacts between Britain and China at all levels. It is a sign of the closeness of our present relations that for the first time since the foundation of the People's Republic members of the Royal Family—the Duke of Kent and the Duke of Gloucester—have recently visited China. There have been a good many ministerial visits in both directions and by Members of both Houses of Parliament, and the British Group of the Inter-Parliamentary Union has also paid visits to China. The noble Lord, Lord Rhodes, told us about these in his speech and, indeed, no one has been more enterprising in this respect than he has. The noble Lord has organised and led three successful delegations—to which he referred with evident pride—and he went to Peking again in the spring.

As well as ministerial and parliamentary visits there has been a wide range of official and unofficial exchanges. They have covered the field of trade, science and technology, defence, agriculture, medicine, education, sport and culture. The British Council has been re-established in China since 1979 as part of our embassy in Peking, and the contacts they sponsor and the cultural agreement they operate are of great value. I should also like to pay tribute to the important contributions by the Great Britain-China Centre, the Sino-British Trade Council, the Royal Society, the universities and private organisations. There are now several hundred Chinese students and researchers in Britain, mainly in scientific subjects. There are a number of British teachers working in China, and most British students reading Chinese at our universities now spend a year in China, either during or after their courses.

The noble Lord, Lord Rhodes, also mentioned the desirability of visits by high-ranking officials. A number of senior civil servants have visited China in the past few years. Others will certainly do so as opportunities present themselves and when useful purposes can be served. One example of regular exchanges at official level is the periodic consultation between the Department of Transport and the Chinese Ministry of Railways within the framework of the Railway Co-operation Arrangement. Another example is a series of exchanges at working level between the Department of Health and Social Security and the Chinese health authorities.

Much of our business with China is done, naturally, at diplomatic level. The Chinese ambassador in London is one of his country's most distinguished representatives; so too is our own representation in China of the highest calibre. We have every confidence in Sir Percy Cradock and his staff at the embassy in Peking—and perhaps I ought to add that almost all the diplomatic members of our embassy there speak Chinese.

The noble Lord, Lord Rhodes, referred to our representation in Peking and recognised, I believe, that we have in recent years already added to the commercial and cultural sections of our embassy. We have also arranged for the accreditation in Peking of members of the China Trade Unit in the British Trade Commission in Hong Kong, so as to increase our support for British exporters—particularly exporters in the southern provinces of China. The question of opening a small consulate in Shanghai mainly for commercial work—a matter to which the noble Lord, Lord Rhodes, specifically referred—has been kept under review. I would like to give your Lordships an assurance this evening that we have been keeping very much in mind the views expressed by British businessmen and by Members of both Houses of Parliament on this matter. We shall certainly discuss this with the Chinese during the coming months.

At present there is no direct United Kingdom Government aid programme for China. However, we have been taking a serious look at this recently. In practice, since 1980 some aid has already been flowing into China. Funds have been channelled through the British Council to help finance their educational aid programme to China. We have also, through the United Nations Industrial Development Organisation, supported the development of a pesticides research and development centre in China. The aid programme is not exempt from current budgetary constraints and is already tightly stretched, but I am glad to be able to say to the noble Baroness, Lady Llewelyn-Davies of Hastoe, that consideration is at present being given to the possibility of initiating a modest programme of technical co-operation with China.

The noble Baroness and my noble friend Lord Geddes specifically raised the question of overseas student fees. This decision was taken with reluctance for economic reasons. I accept that there is a difference of view about this in your Lordships' House. We are doing what we can to help Chinese students who come to Britain under the cultural programme. Besides British Council scholarships, a limited number of bursaries are also being made available under a new scheme operated by the Department of Education and Science. We would like to do more but the current financial climate is difficult.

I should like just to say to my noble friend Lord Geddes—for whose kind remarks, as well as those of my noble friend Lord Bessborough, I was most grateful—that the Government have co-operated with the Overseas Students' Trust, which my noble friend mentioned, in further work on what options might be open for giving further help to overseas students, but within the general context of the Government's present policy. We look forward to publication of their study, which I understand will be early next month. I am sure my noble friend will understand if, in the context of foreign students, I comment that I cannot say more than that.

The noble Baroness also raised the question of the proposed Far East BBC relay station. Provision is made in plans which the Government announced last year to improve the worldwide audibility of the BBC External Services with the construction of a new relay station to cover China, Korea and Japan. A suitable site has been identified by the BBC in Hong Kong and in consultation with the Government of the territory, construction is planned to start in the financial year 1985–86.

We do, of course, offer financial support of various kinds to British businessmen exporting to China. Besides normal commercial credit facilities a number of British banks have extended to China a 1.2 billion dollar deposit facility that is subsidised by the Export Credits Guarantee Department. I very much welcome the news which the noble Lord, Lord Rhodes, had to give in his speech about Chinese encouragement of the use of this facility. Beyond this, under a British Overseas Trade Board scheme, financial assistance may be offered also to groups of British exporters who wish to invite groups of overseas businessmen to visit Britain. In this way, over the past two years, the BOTB has supporting inward missions, the BOTB also supports further five missions are already in prospect during the remainder of 1982. In general we believe that the scheme provides a very effective means of helping British companies to bring their products and services to the attention of prospective Chinese purchasers.

The noble Baroness, and the noble Earl, Lord Bessborough, asked specifically about co-operation in the field of high technology and technology generally. There is also support for inward visits of Chinese scientists and technologists under both the Cultural and the Science and Technology agreements. Besides supporting inward missions, the BOTB also supports outward missions to China and contributes to the costs of British companies exhibiting at trade fairs. It was not until 1981 that China first began accepting international trade fairs and when that happened the BOTB began supporting British participation. We have had five exhibitions and a further two are now planned.

Lord Rhodes

My Lords, at this point may I interrupt the noble Lord? I gave prior notice of this. Would the noble Lord deal with my very strong appeal to do something about COCOM?

Lord Belstead

My Lords, if may, I will come to that in just a moment. The industries covered at exhibitions which have received assistance from the BOTB include marine equipment, electronics, plastics, coal mining and construction, petroleum, education equipment and mechanical handling.

If I may come to the noble Lord's point, I realise from his speech that the noble Lord, Lord Rhodes, with the noble Lord, Lord Bowden, does not approve of China trade coming within the scope of the limitations of COCOM. But within this framework we are seeking to speed up the procedures for dealing with COCOM cases, to keep the list of embargoed items to the minimum necessary to safeguard our strategic interests, and to give due weight to Chinese relations with other countries. British views on these interests have been put forcefully to our COCOM partners and I am glad to say we believe they have had some effect. Any British firms wishing to sell their products to China which have any doubts about the prospects of securing export licences should seek advice from the Department of Trade in their export licensing branch at Millbank Tower.

The noble Lord, Lord Rhodes, and the noble Lord, Lord Kadoorie, whose speech we so much enjoyed, mentioned the subject of textiles, and the noble Lord, Lord Kadoorie, referred to negotiations with the European Community. The present arrangements are in fact set out in the 1979 agreement, which provides for the European Community to maintain a rather less restrictive import regime than was previously in force, while retaining the right to protect domestic industry against disruptive surges of imports in particular product categories. I think it is fair to say that this is consistent with the Community's established policy on low cost imports from all sources, not just China. In the case of China 30 categories of products out of 114 covered by the agreement are currently subject to restraint under the 1979 agreement. The Government believe that these measures represent a package which is fair to the parties concerned. However, a certain degree of flexibility is available for the management of these arrangements. Primary responsibility for this rests, if any further details are needed, with the Department of Industry.

The noble Baroness, Lady Llewelyn-Davies, particularly raised the question of China-US relations, and indeed I wonder whether I might refer for a moment also to China-Soviet relations. So far as China-US relations are concerned, I really would not add very much to what the noble Baroness said, except that it is the earnest hope of Her Majesty's Government that a settlement of any outstanding issues in this area of international relations can be reached. Good relations between China and the United States are in the interests of us all, and we hope that both sides will continue their efforts to avoid any lessening of relations.

So far as China-USSR relations are concerned, of course we all in this House know that President Brezhnev has called recently for better relations the Soviet Union and China, and the Chinese reply is that they will judge the Soviet Union by their actions and not their words. No doubt they had in mind Soviet actions in Afghanistan and Vietnamese actions in Cambodia. I am bound to say that I do not think the Chinese have changed their mind about Soviet foreign policy at the present time.

Having said that, of course tonight the subject which we are discussing is exchanges. The expansion of tourism to China in the last few years has meant that many British people have had a chance themselves to see something of the country about which your Lordships have spoken with such interest. Do not let us neglect the energetic work of television, radio, the press and the speeches of the noble Lord, Lord Rhodes, in enabling more people to understand more about China.

Her Majesty's Government would certainly support further exchanges of views of all kinds and at all levels. In the light of the recent reshuffle of the Chinese Government we shall certainly be considering extending new invitations to Ministers to come to Britain to meet their counterparts and to see for themselves what Britain has to offer. No doubt there may be further opportunities in the other direction.

One of the features of our relationship with China is, of course, our mutual interest in Hong Kong. I should like to recognise the great service which the noble Lord, Lord Kadoorie, has given for the development of Hong Kong. It is due to men like the noble Lord that it forms such an important part of the discussion which we are having this evening. It is, indeed, one of the key subjects which, as your Lordships know, Ministers have discussed on a number of occasions with Chinese leaders. I was very glad that the noble Lord placed on record that practical cooperation between the United Kingdom and China on Hong Kong questions, and directly between Hong Kong and China, has never been more extensive or more cordial. These good relations will enable us to maintain confidence while taking the interests of the People's Republic of China and Hong Kong into account.

Both we and the Chinese Government are studying the question of the future of the territory and are agreed on the vital importance of its continued prosperity and stability. In this the United Kingdom places particular importance on maintaining the strength and the independence of the Hong Kong dollar. I believe that these objectives can be achieved. I see no cause for any lack of confidence in the future of Hong Kong. Her Majesty's Government's commitment to the territory and the interests of its people remains undiminished.

Before I conclude, I should like to answer two questions which my noble friend Lord Bessborough asked me. My noble friend first asked me about the trade agreement of April 1978 and how it was being developed, and in particular whether the joint committees provided for under the agreement have yet been set up. China/European Community relations are good and have developed well since the signing of the trade agreement in that year. Although I have to admit to my noble friend that, as I understand it, the joint committees have not been set up yet, there have none the less been useful exchanges of visits and a European Community/China Business Week was held in Brussels in March of last year. The most recent annual meeting of the joint commission was in Peking only last November.

My noble friend also referred to the evident desire of the Chinese to develop their oil supplies in a way most advantageous both to themselves and to companies from overseas, and asked about the Government's attitude to that. As I understand it, bids are now being invited by the China National Offshore Oil Corporation. British firms have been taking an active interest and there are good prospects for co-operation. British experience and expertise in this area is well known and we believe can make a valuable contribution both in exploration and production and also in the service sector. We are fortunate that discussions are taking place at a time of excellent political relations between Britain and China. My noble friend specifically asked whether the Government would give all possible support to any British companies putting in tenders. I reply that the Government departments in Britain and the embassy in Peking will do all that they can to help British companies make their contribution.

As has been mentioned this evening, the relations between this country and China have become infinitely closer over the last years and, of course, in September my right honourable friend the Prime Minister hopes to visit China. The composition of the party—if I may reply finally to the question of the noble Lord, Lord Rhodes—has not yet been decided, but I assure the noble Lord that the view which he expressed about this will be taken seriously into account in reaching final decisions. No British Prime Minister has hitherto visited China while in office, and both the British and Chinese Governments regard this as an occasion of especial significance. I am confident that it will contribute greatly to the further strenghtening of the relations between China and the United Kingdom.