China: Economic Change and Trade Openings

HL Deb 12 February 1986 vol 471 cc199-231

3.12 p.m.

Lord Rhodes rose to call attention to the changes taking place in the economy of the People's Republic of China and to the possibilites of the expansion of international trade to the mutual advantage of the Republic and the United Kingdom; and to move for Papers.

The noble Lord said: My Lords, where I live they use a colloquialism: Thems as lives longest sees most". I am qualifying for the former very rapidly, and I am fortunate in having had the chance to go to Hong Kong 16 times and to be four times leader of delegations to the People's Republic of China. I consider myself very fortunate.

This is the start of the Chinese Year of the Tiger. So many allusions have been made to the tiger. Recently the children of Britain have had the opportunity of voting on the most popular animal in the zoo: it was the tiger. I am particularly interested in the subject of our debate because in my early days my father was a finisher; he was an operative in a mill which was finishing cloth exclusively for China. I remember vividly what was current at that time: the Boxer Riots. That was a long time ago. I remember the Boxer Riots because every day my father used to come home and worry about whether his livelihood would be undermined.

This is one of the most important periods in Chinese history. In the past 20 years we have seen many changes of mood and many political upsets in China, some of them catastrophic. Take, for example, the great leap forward when peasants were exhorted to try to make steel in their own back yards. They were encouraged to melt down their agricultural implements. There was the cultural revolution which stood law and order on its head and, at the same time, gave Chairman Mao his revenge for the failure of the great leap forward. When Mao died so did the cultural revolution.

When foreign dynasties were established in China they were soon absorbed by the Chinese who imprinted a certain "Chinese-ness" on the barbarian conquerors while, at the same time, the barbarians put new blood into China. This is what is happening to Marxism in China today. Marxism in its purest form is not suitable for China, but with severe adaptation it could become so. It may be that a form of federal government will emerge at some time in the future, but I doubt whether a central government can govern 1,100 million people.

The China we see now is in the early stages of change from a feudal, agrarian nation into a modern industrial society. If these efforts succeed, the Pacific basin countries with Japan and China at their head will be the growth area of the world. But if it fails, the mind boggles at the likely consequences, and we in Britain must try to see that it does not fail.

To discuss what we in Britain should do about China is why I put my name down and I have been fortunate enough to lead this debate. I believe that it matters very much to millions of people what kind of a China emerges from this transition. It is still early days in the transition. The problems are enormous: 800 million peasants, a technically backward industrial sector, poor management, low productivity and, most important of all, an infrastructure 50 years behind present needs. The Chinese are without adequate port facilities such as storage, and there is a shortage of both road and rail transport, never to mention their lack of sophistication in their approach to the markets of the world.

Recently the control and allocation of foreign currency was restored to the provinces and the municipalities, so every province and municipality clamoured for a share and chaos reigned. In 1985 central government brought in control with a stringent set of priorities which lead to long-winded negotiations with foreign sellers and frustration for foreign manufacturers and buyers awaiting decisions. So some companies, both large and small, have tended to throw up their hands in horror, cut their China budget and depart for more favourable areas and climes. The present log-jam could last for another three years. If companies take the view that they can withdraw now and return later when the Chinese have sorted out their problems, they will find that they have sacrificed their early initiatives and that countries such as Japan, the United States of America, Germany and France are in front of us in the queue.

Notwithstanding that catalogue of gloom, the economic growth in China during the past five years is among the highest in the world. It is generally agreed in China that their political, social and cultural problems must give way to raising the living standards of the Chinese people. Without doubt there has been a dramatic increase in living standards. There are some discernible differences of opinion in the leadership but mainly concentrated on method and tactics in achieving their aims. High priority is given to foreign technology, management and investment.

I now come to the important part of what I wish to put over. I am making four or five points. The first is about the embassy in Peking. In recent years the commercial staff at our embassy in Peking has worked valiantly to provide assistance to our visiting companies, particularly since the advent of Sir Richard Evans, the present ambassador. But the period of service of our personnel is too short. The job requires much time, energy and practical experience to make the contacts and to become aware of the factors which affect China's policies, and then to make the thoughtful judgments that British businessmen require in such a complicated country as China. They need a period of at least five years to familiarise themselves adequately with a fast-moving and changing situation. Their present normal period of service is two to three years. They are then shifted to other areas just as their learning curve is beginning to rise.

Most important of all is the need for much more collective work by companies working in a given industrial category. Selling to China is a hard slog, costly and time consuming. It is a very complicated market. In my opinion what is needed is the ability to offer a total British package, industry by industry, or sector by sector. This means getting companies together, even competitors, collectively to construct a China strategy, and maybe appoint a joint sales force, and thus organise a wide variety of consortia specifically brought together to present to their Chinese counterparts the best that Britain can offer in a form the Chinese find convenient to handle, which at the same time is the best way of introducing newcomers to the market.

What I have said about that is no reflection whatever on the British companies established in China. They are absolutely first class, and so are the staffs which they employ. However, British companies working on their own are at a disadvantage compared with the Japanese, European competitors and the United States of America. Although some efforts have been made—by me, incidentally—to bring companies together, the necessary stimulation from the Government is absolutely essential.

One of China's chief problems is to find ways and means of taking more advanced technology into their factories. It is estimated that there are 200,000 enterprises in China in which a modest amount of advanced technology could be upgraded without considerable expenditure. British industry was faced with the need to do this when we inherited much obsolescence from the early days of the industrial revolution. Quite remarkable transformations were made by a modest use of technical innovation. Thus, in my opinion, the British are ideal partners for Chinese enterprises.

My next point is in relation to our overseas broadcasting from Bush House to China. At the moment we broadcast only one-and-a-half hours a day to China compared with Moscow's 17, Australia's 6, America's Voice of America, 9, and even the Tirana and Yugoslav 3. I am very glad it was announced the other day that the funding was to be for three-year periods instead of one, which enables the BBC to plan its broadcasting more effectively. While the change is welcome, it represents no real increase in the BBC external service. The Foreign Office still have the right to prescribe the language in which the BBC must broadcast, and total hours of transmission. While progress on new relay stations overseas and in the United Kingdom (as part of the Government's audibility scheme) goes well, there is no indication that the BBC will receive an injection of new money.

Meanwhile, our competitors—and time and time again I have referred to how we lag behind—the United States, France, Germany, and many other countries, are stepping up their programmes. It ought to be of great concern that the effective progressing of the new relay station for China in Hong Kong, where considerable capital has been spent, may be inhibited from operating to the full by shortage of money. I have given the Minister prior notice of all these questions except this one. I ask him: can the new station in Hong Kong be ready to be opened by her Majesty the Queen when she visits in October?

My last main point is this. What can we do to help China to consolidate?—because on that depends whether Hong Kong sinks or swims. The Chinese are keen on what they know and describe as treaties of friendship. They realise that "twinning" on the European pattern is a non-starter because of the distances involved. At the moment there are several British cities with a treaty of friendship: Sheffield, Coventry, Cardiff and, I think, Bristol. Also, after four years' work on it, I am delighted to be able to say that Manchester has agreed to team up with Wuhan, a big, vibrant city on the Yangtze. In Manchester we have begun with exchanges between the universities—the Manchester Institute of Science and Technology, the Director of North West Arts, and so on—and leaders of the large Chinese ethnic group in Manchester, which is very strong. In the Greater Manchester area there are estimated to be 40,000 Chinese. As a counterpart to our establishing a consul general in Shanghai, a general consulate is to be established in Manchester to serve the North of England. The Chinese Ambassador's wife is the official responsible in the Chinese Embassy for the furthering of this aim. What I am asking is, will it be possible for the Foreign Office to second a person to further it?

My last point is this. We are fortunate to have a Queen who is prepared to undertake arduous journeys on our behalf. The fact that she has agreed to visit China is a coup for the Chinese as well as for Britain. She will be well received in China because her visit has a mark of approval about it which will please them. In the days when we had the Empire we were the most extrovert nation in the world, but since the Empire we have rather lapsed into insularity. We are not quite as good as we used to be in this kind of matter, but we shall learn.

We know that the Chinese are experimenting with their economy. However, is there not a certain amount of experimenting taking place in Hong Kong on our side, as witness the elections and what came out of them last September? If we can respect each other's integrity, surely we can hammer out a solution to our differences and create a climate in which our businesses can prosper. From this House this afternoon I am sure that everybody would agree that we should say to the Chinese, "Kung Hei Fat Choy", which, notwithstanding a Yorkshire accent, is "A Happy New Year". I beg to move for Papers.

3.30 p.m.

Lord Geddes

My Lords, the vagaries, if I may call them so, of your Lordships' House are a source of real wonderment. There have been a number of instances in the past when I would have preferred to be higher in the pecking order. This is one where I would certainly have preferred to be less elevated and have even more reason to be brief. However, I shall be brief. Unlike the noble Lord the Chief Whip, I calculate it as eight minutes and not nine minutes that each of us non-main speakers has and I shall try to keep well within that limit.

I have had the very real privilege of a number of visits to the People's Republic, certainly the most notable of which was as a member of Lord Rhodes's parliamentary delegation six years ago. At that stage, in 1979, the priorities were very clearly spelled out as: number one, agriculture; number two, light industry; and, number three, heavy industry. I have no doubt, or at least I hope, that the noble Lord, Lord Mackie of Benshie, will concentrate at least partially on the subject of agriculture on which he is very well qualified to speak; but there are real worries in that respect, not least the recent serious shortfall in grain production, which is perhaps one area—and I hope to instance others—where expertise from this country can be channelled to assist the People's Republic.

So far as light industry is concerned, here I think we home in, at least partially, on the special economic zones and on the vital necessity for those zones to be export orientated. Indeed, it has been said very recently by the authorities from the People's Republic that they, in each zone, should devote 70 per cent. of their production to export. If that can be achieved—and it will not be only in light industry but mainly so—then it augurs very well for Hong Kong when it too becomes a special economic zone on 1st July 1997.

In heavy industry, we have had a marvellous example just recently announced of the Daya Pay nuclear project: a tremendous example of co-operation between the People's Republic and this country and, indeed, other countries, particularly France. GEC, as I understand it, have £250 million-worth of investment in that project for the turbines, financed by the United Kingdom ECGD project to the extent of 85 per cent. at 9.85 per cent. interest over 15 years. This is exactly the sort of example—and I hope we shall see more—where there can he concrete and positive co-operation between our two countries.

The People's Republic, like so many other countries of the world, but surely with much better hope of future success, has a trade deficit problem. It was estimated that its trade deficit for the last calendar year, 1985, was 13.7 billion US dollars. As the noble Lord, Lord Rhodes, has rightly said, they have been going through some differences of opinion and differences of structure regarding finance. This is of concern and is, again, an example where I think that particularly businessmen in this country, and indeed governments, can be tolerant and forbearing with them.

There must be, as there are now, restrictions on foreign exchange. There are curbs on imports and if the country is to expand, as we all hope it will, this must certainly lead to an increase of trade in kind or what is more loosely described as barter trading. There is a wealth of expertise in this country alone on barter trading. Indeed. I was lunching with the managing director of a specialist firm in exactly that context today.

On transport, a subject on which I have a certain knowledge although limited, I re-read the other day the report of the 1979 delegation. It is interesting to quote just one small paragraph. It said: one of the biggest problems facing the People's Republic will be that of the internal movement of containers. China has at least five ports where major improvement is being made with the construction of specialised container berths. However, hinterland facilities for the movement of containers are totally non-existent, and advice was received that immediate priority was to be given to this subject, necessitating close collaboration within China between the Ministries of Communication, Railways and Foreign Affairs". Here, certainly, is an area where the United Kingdom has a wealth of expertise in port development and construction and in railways. Here is where, to put it bluntly, we should get off our backsides and do something. There are now 73 separate shipping lines, Chinese shipping lines, allowed to trade outside the PRC. The PRC have a fleet of 620 vessels, 13 million tonnes deadweight. But their ports simply are not up to their trade. The China Ocean Shipping Company (Cosco) in Shanghai is forced to use Kobe in Japan as its outward port for the United States West Coast liner trade. Cosco in Shanghai and Cosco in Canton are using Hong Kong as the base port to and from Europe. This augurs well for Hong Kong but is clearly nonsensical as far as the PRC overall is concerned.

There is still heavy congestion in the ports and it can take up to 20 days to find a berth in Shanghai. The communications Minister, himself an ex-managing director of Cosco, is quoted as saying in only the last two or three weeks: "Port construction is a national priority". The 13 largest ports in the People's Republic are operating at 30 per cent. above their theoretical capacity. With Cosco alone projecting 10 per cent. growth in 1986, to 54 million tonnes, there is a distinct possibility that expansion of the People's Republic's maritime sector will grind to a halt simply because the ports cannot cope.

There is great opportunity there for companies and businesses within the United Kingdom where there is all the expertise to assist. Not for the first time I declare my affinity for and with China. I am an unashamed Sinophile. There are enormous opportunities for mutual beneficial trade—and I use that term in the widest possible sense—between our two countries. As the noble Lord, Lord Rhodes, has said, Her Majesty the Queen visits the People's Republic in October of this year. What better year could there be than this, the Year of the Tiger, in which to boost Anglo-Sino relations in commerce, culture and in personal relationships? Like the noble Lord, Lord Rhodes, and I hope in the same dialect—at least in the same Chinese dialect—I say to all our friends in China, "Kung Hei Fat Choy".

3.40 p.m.

Lord Mackie of Benshie

My Lords, like the noble Lord, Lord Geddes, who is so fluent in Chinese, I was one of the "Rhodes scholars" taken to China by the noble Lord, Lord Rhodes; and I was taken three times with him, for which I was enormously grateful. I am not sure whether it was for my expertise in agriculture, or the fact that I always knew when he needed a dram and acted as a sort of cup bearer in order to keep him going, as he did, at enormous speed.

Now I am going to talk about agriculture because, as has been said, it is the biggest industry in China. It employs—maybe under-employs—800 million people. That is a phenomenon which it is difficult to understand. It is difficult to understand that there are 1,000 million Chinese until you see them all coming towards you in Peking, or Beijing, normally mounted on bicycles. It is a great experience for an agriculturist to go to China because they are so tremendously good at agriculture. I remember walking across a bridge and taking the train for Canton the first time I went with Lord Rhodes. I looked out of the window and I could not take my eyes off the landscape: it was so beautifully cultivated. We travelled 200 miles and the whole place was like a garden. It immediately gripped my imagination as to what these people could do if they had the sort of techniques and the aids which we could give to them.

The Chinese have advanced enormously. There has been a terrific rise in production since the peasants got leave to depart from the highly-ordered Marxist-Leninist economy and were allowed to grow a proportion of what they wanted to grow and a proportion of what they know people wanted to eat. Prices have risen but, as always, if you raise prices and you give farmers, large or small, all over the globe, the chance to make a profit they will grow food in very large quantities—sometimes in embarrassing quantities, as in the European Community. However, rather than have embarrassing minuses it is much better to have embarrassing pluses.

As the noble Lord, Lord Geddes, said, what they have done is to grow far more vegetables although, in fact, to the detriment of the growing of grain. That is a basic factor, and it costs them money to import it. They are now having a great increase in animal production, in pigs and poultry, and are producing a great deal more milk. This is really not so much for the Chinese, although they want more animal protein, but the milk products are mainly needed for their growing tourist industry. We have an Australian firm (not a British one) in a joint venture in the production of veal, and of course you cannot have veal without having the dairy cows to produce the calves; but they are tying things together, and it is the sort of thing that perhaps we should be doing.

There are a whole lot of things which they want to grow and in which we have expertise. They want to grow fruit for export, and they want to be able to export a lot of other products. Again, we come back to the great need for more grain. The Chinese have an enormous number of pigs but they are all of rather low production, with enormous bellies so that they can eat weeds from the canals and irrigation channels and convert those instead of grain. The Chinese are prepared to increase their own production of these products both for their own population and for export. Up in a northern province, of which the capital is Harbin, they have enormous areas of virgin land which are rather like the Siberian steppes. The Chinese are fast developing that region. Massey-Ferguson are in there and doing a great deal of experimentation: they are also providing a very large amount of equipment.

We are doing something about trade with China. The British Agricultural Export Corporation, which has a new chairman, the noble Earl, Lord Ferrers, promoted a British team for the export exposition in Canton last year. It was an agricultural exposition and 32 British companies took part. That was the biggest national body there, and the show they put on was tremendously good. A number of them came home and said, "We cannot do anything here"; but at least they had tried and that must be good. Things are going on very well. Strangely enough a firm in Lincolnshire, Cherry Valley Farms (a subsidiary of Nicholson's) are the biggest exporters in the world of breeding ducks to China. That is very enterprising.They have exported British livestock to China: over 300 cattle and over 300 breeding pigs. They have exported those to China in spite of a currency shortage—and the currency shortage does make matters very difficult.

ICI are the main suppliers from this country of plant protection and they have had big export years in 1983–84; but because of the bureaucracy, again, which is so over-prevalent, the Chinese ordered rather too much in 1983–84 and their warehouses are full, so that 1985 and, so far, 1986 have been extremely poor. Mostly the trade has been in insecticides and fungicides. The fact is that herbicides are not so much needed because there are so many people on the land that they can keep it free of weeds by hand labour, and they do it beautifully. But they cannot catch aphids, nor can they catch fungi; so there is a need for insecticides and fungicides.

There are a number of difficulties. While we have had some success, there are a lot of difficulties to reckon with as well as the opportunities. I have already mentioned the currency shortage and the fact that you cannot have consistency; and that makes it difficult. There is also the question of the time it takes to get a decision. That can be very expensive. China is a long way away and communication costs a lot of money; if you have to wait a long time for a decision, it is very bad. Our friends the Chinese really have got to improve their bureaucracy. They have got to do something about speeding up decision-taking: otherwise they cannot expect to get from us the help and the service that they deserve.

I think that we need to do a number of things. Our firms need to use the Hong Kong Ministry of Agriculture. That is an excellent body, with very many experts and many connections inside China. The Americans try to use them a great deal, while we do not do so enough. The point made by the noble Lord, Lord Rhodes, about the commercial attaché must make total common sense. In Chinese terms, and in view of the size of that country, you cannot move after two years and expect someone to acquire the necessary expertise in that time.

Another point is that it is nonsense that we do not have an agricultural attaché there. We have a commercial attaché, and we have there the biggest industry and the biggest source of opportunity unrepresented. I should like to have the Minister's view on that. I agree with the noble Lord, Lord Geddes, that it is a country with great opportunities for British trade, but it is necessary to acknowledge the difficulties in trading therein.

3.49 p.m.

Lord MacLehose of Beoch

My Lords, I do congratulate the noble Lord, Lord Rhodes, on his speech. He certainly has a right to speak on China, and I remember with affectionate respect the way he led that series of delegations through Hong Kong to China. They were a very personal exercise in the improvement of Sino-British understanding.

I have a profound interest in our relations with China and I have been lucky enough to spend a good deal of my working life involved in them; but I am not a China analyst and I have not myself done commercial business in China, as some of your Lordships who will speak today have, so successfully. So as an observer rather than a player I shall be suitably brief and confine myself to making only three or four points.

First, there is the complexity of doing business in China, to which the noble Lords, Lord Rhodes and Lord Mackie of Benshie, both referred. Many businessmen have told me that they are daunted by the vastness of China and by the scale of the contracts they read about in the media. Well, these contracts are there, and, of course, they are well worth the time and trouble taken to secure them. But China offers very many markets, whether geographically in the sense of ports, economic zones, development areas or provinces, or functionally. Within this diversity of markets I have seen much small and medium business to be done that did not involve the time and expense of the headline-catching contracts, and perhaps over which foreign exchange was a little easier for the Chinese importer. I do not think, certainly in this market, that big (if you can secure it) is beautiful, and I do think that very often many small or medium contracts are much more convenient.

My second point is about the role of Hong Kong. It has given an invaluable approach to both large and small business in China. In selling to the rest of China it has proved useful to demonstrate that something—a product, a technology, a financial service—is competitive and efficient in the Hong Kong market. While I believe this is generally appreciated, I am not so sure that the converse is; namely, that failure in the Hong Kong market, or absence from it, does not help in the China market. Of course, the Hong Kong market is big in its own right, but that is not our subject today. My point simply is that attention to the Hong Kong market and promotion in it can be, and in many cases will be, a very useful element in promotion in the rest of China. Neglect of it is just the reverse. I therefore welcomed what the noble Lord the Minister said on Monday, 3rd February, about the role of Hong Kong and the role of the United Kingdom Trade Commission in it.

Then, if one considers the prospects of trade with China, one also has to consider what the political and economic prospects are there. We have noted the political and economic trends of the last eight or nine years associated with the name of Deng Xiaoping. The question on which one has to take a view is: will these trends persist? It is dangerous to look into a crystal ball anywhere, and particularly in somebody else's country, but all I can say is that the broad consensus among most analysts here and in the United States (and, for what it is worth, my view) is that yes, these trends will persist, give or take a degree or two of variation.

Because of the horror of a return to radicalism and many other positive reasons, reaction to this trend is now unlikely to deflect its general course, so, broadly speaking, I believe the trend is here to stay. This implies surely what most people in China want for themselves and for their country: a vigorous but prudent rate of economic growth with a standard of living targeted to rise by over 200 per cent. by the end of the century. The prudence in current planning and its realism are clear, and the Seventh Economic Plan clue shortly to be approved is in fact broadly in line with the recommendations the World Bank made on China last year. The prospect of a substantial growth in industry, with the emphasis on energy, transport and communications and a 40 to 50 per cent. increase in imports and exports before 1990, surely offers our exporters and our financiers a rising opportunity.

I therefore congratulate the noble Lord the Minister on the personal encouragement he has given to this trade, and also on the line of credit he has secured for it. The noble Lord, Lord Rhodes, referred to the possibility of the national purpose. I really think a line of soft credit is as near that as one can get.

I am sure we all agree on the importance of our relations with China. On many international problems we have similar views, and we have a common, agreed and very important interest in the future of Hong Kong. We value each other's culture, and we have a mutual interest in a wide variety of economic and technological exchange. I think that the noble Lord. Lord Rhodes is to be thanked for focusing so well on this economic aspect of our relationship.

3.55 p.m.

Lord Campbell of Croy

My Lords, I should like to congratulate most warmly the noble Lord, Lord Rhodes, on raising this subject, and on the admirable way in which he has introduced it. He has an attitude, if I may say so, built on great experience and realism in international trade. His specialist subjects are China and textiles, and I have been glad to be able to take part in proceedings in this House with him in the past 11 years, and before that in another place, when we were both Members. I am also glad to follow the distinguished former Governor of Hong Kong.

But I intend to speak myself briefly on one element of recent British-Chinese co-operation—significant and successful, I believe. That is the expansion of the news media in China. This co-operation has helped to provide a favourable climate for good relations between our two countries, and for increasing business. I refer to two developments. First, there is the British contribution to the first daily newspaper in China in the English language, the China Daily, which started about four years ago. Secondly, there is something which happened last year which was as exciting a project: a training college for journalists of the Xinhua News Agency. I have been involved (noble Lords may ask how I have come to be involved, so I must explain) because I am a trustee of the Thomson Foundation. The Foundation was approached about six years ago by the Chinese Government, evidently because the Foundation had earned a reputation for impartial help and training in journalism and broadcasting; that is to say, we have no strings attached to the aid which we give, but we try to share the costs with other countries if we know that they can afford to contribute. I would remind your Lordships that the Foundation is a charitable organisation based in this country, the United Kingdom. It was founded by the last Lord Thomson of Fleet, the noble Lord whom many of us knew as Roy. It has provided training and expertise in journalism and broadcasting in about 90 countries during the last 20 years.

The Foundation decided to respond positively to the approach from the Chinese Government. We offered advice and training for management, marketing and running of a daily newspaper in English. This operation started with a course in 1981 in Beijing with a British teaching team and a large number of Chinese journalists. In due course, the China Daily appeared on the news-stands in China. I must make it clear that we in the Foundation are not involved in editorial policies; for example, the content of leading articles. The Foundation simply has the task of transmitting the techniques required for an English language daily newspaper. About two to three British advisers are normally at any time working with the Chinese editorial staff in Beijing. Many of them have been granted sabbatical leave by their newspapers in this country.

What was it, one may ask, which motivated the Chinese Government to make this approach in the first place? I believe that it was originally a feeling that there was a lack of any way of informing English-speaking visitors to their country about national and international news. They could not find anything in their hotels or anywhere else which informed them in the English language of the news of the day, and this at a time when, as a result of their break with the Soviet Union, there were many more English-speaking people visiting their country to help and advise them and also to do direct business—not only British, but Americans, Australians and others. Some of them were even wanting to know the test match scores or, if they were Americans, the baseball or other sports news—though I am sure that British visitors during the past few days could have done without the cricket news from the Windward Islands and the Leeward Islands. But I can assure your Lordships that early next week there should be no British person in China who cannot find out the result of the Calcutta Cup on Saturday, and whether Scotland or England has won it.

More recently, the interest in the China Daily has also been from Chinese all over China who, apparently, want to learn or to improve their English, and as a result the paper has in the past four years been increasing in circulation and flourishing. There are now editions for Hong Kong, New York and San Francisco; and during this year it is expected that a European edition will be started. The British and the Chinese have been working together in the management and production of this newspaper. The British are not there to influence the views of the Chinese, but they have become respected members of the team, and their opinions are sought and listened to.

I come now to the latest development. No doubt arising from the success of the co-operation on the China Daily, the Chinese Government invited the Thomson Foundation to start with them a training centre for the Xinhua News Agency, which is the Chinese national and international news agency, and a British training team of four have been in China starting a course and starting this centre. The number is expected to be doubled shortly and the operation is proceeding. This centre is called the Xinhua News Agency-Thomson Foundation International Journalism Training Centre.

For both of these projects, the China Daily and the training centre, there is training for Chinese journalists in this country. Some are attached to individual British newspapers, and indeed they may have experienced some unusual events in the past few weeks if they have been with certain newspapers. Any British visitor to China nowadays is almost bound to see the China Daily. In fact, he may be dependent upon it for news of what is going on in China and in the world, unless he happens to be familiar with Mandarin or Cantonese.

As the Motion of the noble Lord, Lord Rhodes, states, changes have been taking place in the economy of China. At the same time growth and development have occurred in the Chinese press and international news services. I have given a brief account of the British part in this, which is continuing and increasing in an atmosphere of excellent relations. Your Lordships may agree with me that this can only be helpful to fostering good economic relations in general and trade between the two countries.

Baroness Macleod of Borve

My Lords, before the noble Lord sits down I wonder whether, because of what he said about communications, he thinks that we should ask our universities to teach Chinese in view of the close proximity that we might have through trading in the future.

Lord Campbell of Croy

My Lords, I do not think that I must trespass too much on the time. I have kept well within my limit. I am sure that anything that can be done in this respect will be helpful to the objects of this Motion, but it is much too large a subject for me to expand on now.

4.5 p.m.

Lord Greenhill of Harrow

My Lords, we must all thank the noble Lord, Lord Rhodes, for raising this matter, which in normal circumstances would have justified a full length debate. I found myself very much in agreement with his forceful speech which contained constructive suggestions. He has done this country a very great service by the characteristically dogged way in which he has maintained interest in China and kept close contact with Chinese personalities over the last decades. Long-term friendships established in this way over the years are particularly valuable now. I saw him in action in China and admired his energy. I do not know whether he drew any strength from the fact that he always wore a Lenin-type hat. He certainly drew attention to himself in China by doing so.

As to the present and future situations, some weeks ago there was an important leading article in The Times which concluded with the sentences, In the long term, the very long term, the omens for a prosperous, powerful and responsible China are favourable. But the greatest risk at the moment is that we treat China as a stable country. It is not. I am inclined to think that this judgment, though it is controversial, may be correct, and I found it widely shared when I visited the Far East towards the end of last year. But I was encouraged by what the noble Lord, Lord MacLehose, with his great knowledge, said, which suggests a more optimistic view.

But the noble Lord, Lord Rhodes, is quite right to draw attention to the extent of the changes now taking place, and these changes offer new opportunities much earlier than might have been expected. We should manage our political relations and our commercial policy accordingly. But we should not delude ourselves with the mirage of huge markets and quick profits, as some of our competitors have already done.

I do not think that British industrialists are making that mistake. Some have had successes and we must thank the noble Lord, Lord Young of Graffham, for the weight that he put behind the recent industrial missions to China. But many companies have already had disappointments, and expensive disappointments. The danger is that they will be discouraged and will withdraw just when it is vitally important to persist and take a long-term view. But long-term views cost a great deal of money and the Government and industry—I emphasise that—both together must make it possible for our links to be maintained and increased.

We are not strangers to China—we have been doing business there for centuries—but never has the competition been fiercer, and now there are formidable industrial rivals on the doorstep of China with strong special affinities. Nor should we forget that China will increasingly compete with our own industries—and the noble Lord, Lord Geddes, has drawn attention to the power of the Chinese shipping industry. Furthermore, we must accept that changes in Hong Kong may diminish British influence in the long run, or at least make it more difficult to maintain. Certainly any British business people doing or seeking business in China should seek partners in Hong Kong.

The agreement with Hong Kong has removed one of the historic barriers to improved political and commercial relations. There are, however, other historic barriers. I refer to claims for British property seized by Communist governments and to defaulted bonds issued by former Chinese Governments. I hope that Her Majesty's Government will take a realistic view of these questions and not allow them to prejudice current and future business. We are in these matters already at a disadvantage compared with our competitors. No doubt Her Majesty's Government have studied these questions, but I should like to be assured by the Minister that they have them under constant review. China is likely to be a large borrower in the international financial markets in the coming years, and I want to be quite sure that we are not unnecessarily putting ourselves at a disadvantage.

I referred to the need to maintain and increase our links with China. Members of the House already know how immensely successful the BBC language service has been. This is distinct from the overseas service. The presenter of the programme called "Follow Me", a Miss Kathy Flower, is no doubt the best known British personality in China, far better known than the Prime Minister or even Princess Diana. Her programme had an audience of more than 100 million, and some say many more. But there was a real risk that the programme would cease through lack of money. As a result largely of the generosity of a Hong Kong charitable foundation founded by an English businessman, a new programme called "Follow Me in Science" is being made and is concentrating, I understand, on technical language. Such a programme should never have been put at risk.

Less well known, but very important, has been the work done by the Thomson Foundation, to which the noble Lord, Lord Campbell of Croy, has referred, in the training of Chinese journalists in the Far East and in sustaining the English language newspaper. How we have the nerve, looking round, to try to teach other people how to run newspapers, I do not know, but what has been done by the Thomson Foundation has produced very good results. Lastly, the House is familiar with the mistaken, but partially corrected, policy of Her Majesty's Government towards foreign students. It is essential that Chinese students should be catered for.

A prosperous and stable China is in the interests of us all. We should do what we can to contribute to it and to share in its increasing wealth. We must not forget that China is a nuclear power and if it achieves strength and stability it can become a valuable influence in maintaining international peace.

4.13 p.m.

Lord Nelson of Stafford

My Lords, we can all be grateful to the noble Lord, Lord Rhodes, for introducing this debate this afternoon. Unlike a number of other noble Lords, I did not have the privilege of accompanying the noble Lord, Lord Rhodes, on his visits to China, but I have been there on many other occasions as I had the privilege of being president from 1973–83 of the Sino-British Trade Council of the British Overseas Trade Board whose chairman of that time, my noble friend Lord Limerick, will be speaking later in this debate.

In that capacity I visited China many times during the processes of change to which the noble Lord, Lord Rhodes, referred, from the Cultural Revolution through the turmoil of the Gang of Four and through the period of consolidation under the powerful leadership of Deng Xiaoping. Many changes occurred during that period and I agree with the noble Lord, Lord Rhodes, that many changes are taking place today. I say to your Lordships from all my experience that changes will go on taking place in China. It has always been a country of change—changes from the top of the social structure right through to the very lowest levels.

The noble Lord, Lord MacLehose, is right in referring to the fact that progress will continue in the future. I agree with the noble Lord on that. But changes will continue to occur, and although the progress will be steadily forward there will be periods of retrenchment—wise retrenchments to prevent the overheating of the economy. The Chinese Government have shown themselves skilful in doing that at the right time. It is inconvenient to those who are developing trade but wise in the long run. Those changes will, in my opinion, continue and must be expected.

During my association with China trade I have had the opportunity of leading many delegations and of heading up a number of important exhibitions in the People's Republic of China. During those visits I have had the privilege of meeting many of the leaders of the Government of the People's Republic, both in Peking and in provincial centres. On all occasions the reception received by the delegations I was leading has been most friendly.

Consistently it has been put to us that the People's Republic of China desires to see an increase in trade with the United Kingdom. It was often referred to me in the context of seeing a balance of trade between China and Japan, China and the United States, and China and the European Economic Community. Within the EEC they have expressed the wish to see the United Kingdom taking its rightful place. I am interested to see from published reports that those same sentiments were expressed to my noble friend Lord Young during his recent visits in the past year. Things are still favourable in that respect. But the United Kingdom level of trade has not been all that good although it has been steadily increasing. Within the EEC it is on a par with France and Italy, but it is only approximately one-third of that done by Germany in the People's Republic of China. In my opinion we should be doing more and can do more.

Now that the shadow of uncertainty which has hung over the future of Hong Kong has been removed—and I should like to take this opportunity to express our sincere gratitude and congratulations to those on both sides who were responsible for the conclusion of that successful negotiation—I believe this can provide a valuable springboard for the further development of our trade. I impress upon your Lordships that the resources we have in Hong Kong of goodwill, experience and knowledge can be of great assistance to us in the immediate future in expanding our China trade. It is already evident that this is taking place. More and more China trade is going through Hong Kong right now as a result of these favourable developments.

My noble friend Lord Geddes referred to the Daya Pay power station with which my own company has had the privilege of being associated. My noble friend referred to the fact that this was an interesting illustration of co-operation between Britain and the People's Republic of China and the Chinese Government and the British Government. Perhaps I may also draw the noble Lord's attention to the fact that it was an illustration of co-operation between the People's Republic of China and Hong Kong, because the basis of that agreement is payment with power delivered into Hong Kong, paid for in foreign currency which itself pays off the debt; a good illustration of the importance of the Hong Kong connection.

The Motion of the noble Lord, Lord Rhodes, refers to.

the possibilities of the expansion of international trade to the mutual advantage of the Republic and the United Kingdom". I believe that there are great opportunities. Those of us who now have worked on the situation for a number of years have, I believe, convinced the Chinese that the United Kingdom has the products and the technology that can contribute to the needs of China in the years ahead. But we must of course go on selling that message and selling it again. We have also demonstrated that United Kingdom goods are competitive in price and performance, and can be delivered on time. At one time it was not easy to convince the Chinese of that; they took a lot of convincing, but I believe they are convinced today.

Her Majesty's Government have demonstrated their support for those of us who are trading in China, through ministerial visits, such as that of my noble friend Lord Young, last year, by other Ministers before him, and by the Prime Minister. We now have the support of Her Majesty the Queen herself, through her planned visit later this year. The Government have responded also to the need to meet the requirement for special terms of credit and soft loans, which is very important for a country such as China which is trying to do so much at the present time with the limited resources that it has at its disposal.

As an industrialist, I support the point made by the noble Lord, Lord Rhodes, in his opening speech concerning the need for strong and effective embassy support for those of us who are developing trade in China. I say not only that those who are working in the embassy should spend longer periods of time there, but also that we need more of them with the highest possible commercial skills that are available. China is a difficult market. There are no normal commercial avenues. There are no commercial or technical journals to consult and to help in the gathering of information. There are many difficulties in establishing exactly where decisions are taken, and this itself is changing all the time. One needs constant advice and renewed advice.

Neither is it easy to overcome the language barrier, and the size of the country is of course tremendous to anyone who goes there. We therefore need strong support from our embassy there; but I pay tribute to that which our ambassadors successively and their staff have done over the years. Is it enough? That is the question. It has taken us literally years to have a consular general appointed to Shanghai. Thank goodness that we now have one!

I have the impression that our competitor nations have recognised these problems. It would be very interesting to know, if my noble friend the Minister has such information, how the size of our embassy staff compares with that of our main commercial rivals within China. The term "embassy staff" must I believe include, with some countries, those quasi-government organisations that do a lot of the work.

The stage is set for an advancement of our trade in China but I would add one further point. It is a difficult market and one that requires patience, perseverance and much courage. We must be sure that our salesmen have the support not only of the Government but also of their own companies' managements at home. It takes a lot of persuading hard pressed managers that the time and money spent in China is worth it; and it is a very expensive operation. But at the end of the day, and as has been demonstrated on many occasions, it can pay off.

Finally, companies should take note of the fact that when the Chinese enter into commercial arrangements, they stick by them and are good payers. I would say also that they are very loyal friends. They remember those who help them in time of need, and those who establish themselves in that market now will be there in the future and for a long time to come.

4.25 p.m.

Lord Saint Brides

My Lords, by comparison which the noble Lord, Lord Rhodes, and others who have spoken so far in this debate, my own first-hand acquaintance with China is both slender and recent. But not long ago, some of us had a most interesting conversation with the Prime Minister of China in Beijing. Some of the points he then made to us and some of our reflections on what he said are, I believe, relevant to this debate. I hope that your Lordships will forgive me if I take up some time to tell the House about them.

Seven of us were in Beijing last September as a team from Stanford University, by invitation of the Chinese Institute of International Affairs. We had, quite unexpectedly, a long interview with Mr. Zhao Ziyang, who was remarkably frank in what he said. He began his account of the internal situation—of the economic and, to some extent, political and social situation—in China by telling us that the results of the economic reforms that had been introduced in the past few years had been highly positive, expecially in agriculture and small-scale industry. In both, he said, growth and output had been much enhanced and the workforce was now far more vigorous and productive than it had been.

Mr. Zhao Ziyang explained to us that any worker will try harder and produce more if he receives a proper share of the wealth that he produces. (I must say that as a representative of the unregenerate and capitalistic West, I found there to be a certain pleasing irony about being told this by the Prime Minister of a leading Communist country.)

Mr. Zhao stated that there has also been a negative side. Tax evasion was rearing its head, and some entrepreneurs had enriched themselves overnight by dubious means. Above all, it would take time for the Chinese authorities to learn to manage an economy in which, for example, the larger industries took their own decisions, as well as the smaller ones. He wished to draw our attention in particular to the need for the urgent creation of a whole new body of laws and regulations to govern economic and commercial activities.

I judged from those statements that the Prime Minister and his colleagues are essentially pragmatists. They are encouraged by the successes that they have secured through reintroducing the profit motive; but they are not unaware of the social and political stresses and strains that it may also produce—especially if gross financial inequalities once again become a main feature of life in China. For example, will the Communist Party secretary in a village where some of his parishioners are rapidly becoming rich be able to retain his former influence when he himself has remained poor?

And what about the military, who, like other servants of the state, are employed at a fixed salary and have no legitimate access to the means of self-enrichment? Yet it is on the party, the military, and the civilian bureaucracy generally that the Chinese Government's continuing authority must depend. Let us not forget that China is still, and is likely to remain, a highly authoritarian society. Certainly there have been some economic liberalisations; but so far as I am aware, political liberalisation is not in any way on Mr. Deng Xiaoping's programme.

So it seems to me that the intending foreign investor ought to take into account the possibility that China's present trend towards a kind of market socialism geared to rapid growth and based upon the reactivation of acquisitiveness as the main motor of reform, may be slowed or even halted if circumstances were to make that seem desirable; but not I think reversed, since so many tens of millions of Chinese have now benefited from their new freedom to make money for themselves and their families through diligent labour, and will not now lightly acquiesce in its loss.

Mr. Zhao Ziyang described China to us as the largest of all the developing countries; and he held out a bright prospect of mutually beneficial co-operation with Western countries, including our own, in modernising China, provided that the industrialised peoples were ready—as he put it—"to move out of the sunset industries, to move over and leave them to us". Mr. Zhao made it very clear that it is to the West that he and his colleagues are primarily looking for partners. There could be no question, he told us, of ever reviving the Sino-Soviet relationship of the 1950s. He said that this relationship had been contrary to China's national interest.

In principle, therefore, proposals by British businessmen for joint ventures with the Chinese are welcome in Beijing, as several noble Lords have already pointed out. I know from my own experience—not of China but of another large developing country, which is India—just how carefully such proposals have to be thought out, just how carefully weighed and framed, if they are to succeed, and how their sponsors have to be patient and show imagination and forbearance in the long and complex process of reaching agreement. But the opportunities are there; and I myself hope deeply that Britain will join in proper measure with other Western countries and with Japan in contributing to China's success.

Last but not least, as we all know, the presence in our country of overseas students can be a valuable lead-in to subsequent commercial opportunities. The Chinese are hungry for technical know-how, and they are sending students abroad in large numbers in search of it, notably to the United States. The figures which I was given in Beijing were of 800 Chinese students here in Britain and 30,000 in the United States. These figures seem to me to be quite disproportionate. I wonder whether the Government would agree that the number of Chinese students coming to Britain is too low and, if so, what steps can or should be taken in their view to increase it?

4.32 p.m.

Lord Oram

My Lords, I certainly join with other speakers who have complimented my noble friend Lord Rhodes on his initiative in respect of this debate, and indeed on the many other initiatives which he has taken over the years towards improving Chinese-British relations. He has done a great work and we are glad to join him in this debate.

The Motion which my noble friend has tabled has two connected parts. First, it refers to the economic changes in China; and, secondly, to the opportunities for increased trade which those changes offer. Most of the speeches have perhaps concentrated more on the international trade aspect of my noble friend's Motion; I shall give emphasis to the first part, dealing with economic changes in recent years. My claim to speak on those changes is based on a quite intensive, though short, study tour which I was able to make it the provinces of Sichuan and Hunan two years ago under the auspices of the British Council. I shall remind your Lordships that that was some seven years after the downfall of the Gang of Four, and four years after the historic third plenary session of the Central Committee of the Chinese Communist Party. It was at that session that the major policy changes in the Chinese economy were introduced under the leadership of Deng Xiaoping. By the time of my visit those changes were being actively implemented, particularly in the rural economy of Sichuan, and that was the first testing ground for the radical transformation of the huge communes which had been the much vaunted and much praised rural institutions during the Cultural Revolution.

I had many opportunities of discussing with the peasants what changes in the communes meant for their activities as farmers. They made it clear to me that they warmly welcomed the transfer of the political powers of the communes to the townships; and in particular they rejoiced—it was seen in their faces—in the new system of agricultural production which was being brought about. No longer were they subject to the edicts of the so-called "Revolutionary committees" at all levels in the communes and the crude egalitarianism which previously had stifled all individual incentives. Instead, they were now freely members of their agricultural production co-operatives, and under the new system, which they call the "responsibility system", they were now accepting responsibility for the results of their work—both the benefits if surpluses arose from their work and the penalties if shortfalls were the consequence of their activities.

In the past two or three years this responsibility system has been extended to industry and commerce, including export/import enterprises. This means that today throughout the Chinese economy enterprises take their own decisions on such matters as prices, sources of supply, markets, reinvestment and rewards to workers. Of course, they do this within the general framework, within the parameters of overall state planning. If they are successful in those economic decisions, they get higher incomes, which are shared among the workers, but if they fail then their incomes are lower.

All this is a very radical departure from the previous highly centralised state control of enterprises, and these changes are proving themselves in a remarkable way in practice. The Chinese have with confidence set themselves the formidable task of doubling the 1980 output by the year 1990, which is a doubling in 10 years, and they are well on course to that target. There have been striking increases in incomes both in the towns and, even more so, in the countryside, much evidence of which I was able to see personally.

Much has been written about the encouragement to peasants to get rich, and indeed much nonsense in that connection has been uttered about this being a reversion to capitalism. It is nothing of the kind. I remember particularly a talk that I had with the head of a peasant household whose income had increased dramatically under the new policies. I asked him what he would be spending his money on and the answer was full of interest to me: there was to be a bicycle for one of his sons and his family were going to have better and more varied food. I was struck, too, when he spoke of buying clothes suitable for the summer instead of one set of clothes for all seasons. Looking at the earthen floor of his cottage, I asked about possible floor covering. That was dismissed as a luxury, a dream of the future.

There are important lessons to be drawn from that conversation. Multiply that household, as one does in China, by hundreds of millions. Remember that 80 per cent. of the economy of China consists of peasant households! One can then see what a vast market will exist if the economic changes succeed, as seems likely. I suggest, however, that we in the West delude ourselves if we believe that this consumer market is a market that we can exploit, for the Chinese will make those consumer goods themselves. They have a planned economy, a socialist economy. They will not waste their hard-earned foreign currency on imports of consumer goods from the West.

China has opened its doors to the outside world—doors that were closed during the years of oppression under the Cultural Revolution. But they will be careful to see that what comes through those doors, be it ideology or material goods, will be such, and only such, as suits China itself—the new kind of socialist China that is their objective and the reason why they have brought about the economic changes we are discussing.

A few days ago in your Lordships' House we had a brief preview of this debate. Some noble Lords pointed to the desirability of our businessmen becoming familiar with the cultural background of the Chinese nation. That is clearly desirable. But, in my view, it is still more important that our businessmen should appreciate both the opportunities and the limitations that they face in seeking a trading relationship with a vast socialist economy. The contracts that they must seek will suit them, the businessmen, and they will suit Britain. There is no doubt about that. But there is no doubt also that the statesmen of China will ensure that those contracts are such as will suit the socialist purposes of China even more than they suit the West.

4.42 p.m.

The Earl of Limerick

My Lords, not for the first time the House should thank the noble Lord, Lord Rhodes, for giving us the opportunity to talk about the important relationships between this country and the People's Republic. I should like to start with a perspective of change between my first visit, accompanying Edmund Dell, then Secretary of State for Trade, in August 1978, and my last visit in July last year, and to deal not in facts and figures but more in impressions and aspirations. What does one notice? One notices now that 90 per cent. of the people are dressed casually but smartly in cotton shirts and trousers or skirts with welcome flashes of colour from the ladies. One sees no fewer bicycles but a vast increase in four-wheeled traffic capable of producing a traffic jam on the way to the Great Wall—a traffic jam of coaches, construction traffic and motor cars that would not disgrace any nation of the world. One sees a great increase in general activity. As for attitudes, one finds people who are friendly, intensely curious, eager to learn and sometimes disconcertingly well-informed on points of detail. As to realisation of scale, it is a country in which, every time you see a new moon, you reflect that there is a net increase of two million in the population.

In 1978 there was a rebound from the Cultural Revolution. After the Gang of Four, the four modernisations—agriculture, industry, technology and defence. China, at that moment, when we were there, was opening like a lotus flower. There was a recognition of the special place that we and the people of the PRC occupied in each other's history, culture and estimation. At that time, the expectations of trade growth that were aroused—intense both inside and outside the country—could not be fulfilled. The resources of planning, of management and of infrastructure, not least of finance, simply were not available. Last July, I returned as leader of a mission from the British Invisible Exports Council following an earlier mission in 1980. We proposed our programme to our friends, the Bank of China, who replied very promptly, "We like your programme. We wish to allow the maximum time for your presentations, so we have cancelled your suggestion of having Chinese speakers. Please will you avoid generalities and speak very much at a technical level".

We had a team, multi-disciplined, of 21 people. We were confronted by representatives—we had asked the Bank of China to broaden the audience—of 30 institutions, the very existence of one or two of which was barely known to us; a total audience of 300. The age profile was the mid-thirties, and about one-third were female. Many of them followed our papers closely in English. Afterwards, they launched at us some very detailed and well-informed questions. It was just the pitch that we had hoped to make, and just the audience that we had hoped to make it to.

Our approach, unlike some, was that we had no inhibitions whatever about the transfer of technology. Our technology was concerned with the use of international services, many of the best of which are centred in the City of London. We were saying that the more that we can teach you and the faster you can learn from us to our mutual advantage, the better we shall have served our purpose. In the course of the mission I was present when the news was conveyed officially to the Chinese Government, to Madam Chen Muhua, governor of the People's Bank, that the PRC was now regarded as eligible for United Kingdom capital aid. This news was received with real gratitude, and rather touchingly, although it only restored us to a position of relative competitiveness with Japan, France, Germany and the United States, to name but four.

Our trade earnings are running at a very modest level, quantitatively hardly significant to either country and far short either of their qualitative significance or of their potential. I am optimistic without being starry-eyed, that this trade can be expanded by a substantial factor. I shall give the reasons. There is, first, the potential. China is on the move. Her own exports are growing, and purchasing power is increasing rapidly, especially in the rural sector. Secondly, a basis of trust exists between us. The Chinese people see business as a partnership to be conducted for the mutual benefit of the parties: hence their preference for a two-page document spelling out the purposes of the partnership rather than a 30-page document explaining what happens if there is a problem between the partners. There is a growing number of old friends on the British side. To be an old friend is not a measure of the length of your whiskers: it is more a measure of the times you have visited the country and the depths of the connections that you have managed to make. In this, happily, we score quite well.

Next, our British exporters can now quote competitive packages against intense competition from the world to include consultancy, technology transfer, export credit, aid where required and, where it may be necessary, also counter trade which is destined, I am convinced, to play a much greater part in our exchanges. There is the Chinese wish, overtly expressed, to diversify away from over-dependence on Japan and the United States to Europe and, within Europe, especially to Britain.

There is the point already made by my noble friend Lord Campbell of Croy and the noble Lord, Lord Greenhill, about the growing use of the English language, with the programme of Miss Flower and "Follow me". There is the fact that I learned and verified that no fewer than 80 per cent. of the boys and girls in middle school in China—that is, aged 12 to 18 years, approximately—are learning English. Ten per cent. are learning French. That leaves 10 per cent. for the other languages of the world.

I have discussed this possibility with some of my Chinese friends and I believe that there is some prospect that the English language, given the great communication difficulties within the PRC itself, may become in China what the English language has remained in India, which is a convenient means of internal communication. Therefore it makes sense to devote a great deal of attention and resource to the development and teaching of the English language in our relations with China.

Then there are politics. First, there are the external politics. The joint declaration on the future of Hong Kong was a great landmark. The climate, as our friends tell us, has never been better. This underlies another point of great importance, which is our continuing relationship with Hong Kong, a trading partner of great importance in its own right, a partner of great significance as a gateway especially to the southern part of China, and the great adventure now embarked upon—that of two cultures, one people.

On internal politics, speaking to an on-the-record occasion at the end of his visit at Chatham House, Premier Zhao Ziyang gave us a fascinating exposé of the position of the PRC. At the end he was asked a question by the noble Lord, Lord MacLehose—and I hope I shall quote him correctly—who said, "There are some of us, Mr. Premier, of whom I am not one, who are concerned about the possibility of the return in the PRC to the conditions of the Cultural Revolution". After the question was translated Premier Zhao laughed and said, "Yes, and there are some in China, of whom I am not one, who are even more worried than you are about that prospect". He went on to explain his belief that because of the trauma that had arisen from the conditions of the Cultural Revolution this would never be allowed to happen while there were those active who remembered it.

Problems?—of course there are some. There is the weakness of the infrastructure and the slowness in negotiations. Three qualities are required, one is told: patience, patience and patience. There is overheating; some delays in payments; very rapid growth. But the opportunities far outweigh the problems and justify from us a major effort. The prospects for our visible trade are good. Behind these are the services: consultancy, banking, insurance, commodity broking, dealing, shipping, freight forwarding, law, accountancy, civil aviation and others. The prospects for our visible trade are good: the prospects for our invisible trade, I believe, are even better.

4.56 p.m.

Lord Chalfont

My Lords, I should like, if I may, to express my appreciation, as other noble Lords have expressed theirs, to the noble Lord, Lord Rhodes, for allowing us to debate this question briefly in your Lordships' House this afternoon. The noble Lord certainly qualifies under the rules laid down by the noble Earl, Lord Limerick, as a very old friend of China. As it seems in order to advance one's qualifications for speaking in this debate, perhaps I may say that my first visit to China took place 44 years ago as a young army officer, but as that was before the Revolution it is perhaps somewhat irrelevant to today's debate.

My next visit was as the leader of the first parliamentary delegation to go to China, in 1972, after what was known as "the thaw". Since then I have visited on a number of occasions. My interests and my contacts have always been in the field of defence and international strategy. It is on that subject that I should like to spend a few minutes this afternoon.

The People's Liberation Army, as it is known in China, is the largest standing army in the world. It covers, as your Lordships will know, not just the ground forces, the army, but all three services—the navy and the air force as well. Its strength is variously estimated as between 3.9 million and 4.2 million people in the regular forces, with perhaps another 12 million people in the militia. This is an enormous armed force, and one which I think in the context of the Motion of the noble Lord, Lord Rhodes, requires very close study by those of us in the West who are looking towards China as a partner, not only, I hope, in the field of commerce but of politics and strategy as well.

The armed forces of China—the PLA—are undergoing a considerable reorganisation at this moment. First, they are undergoing a reduction in numbers from their level of somewhere about 4 million to 3 million. As a result of this, their equipment and their doctrines—their tactical and strategic doctrines—are also undergoing very considerable re-assessment. I think that this is of very great importance to us in the West.

At the moment the People's Liberation Army is a very austere force. It is based on the doctrine of the people's war. That is, the strategy of the People's Republic of China, if it were attacked by its main potential enemy, the Soviet Union, is to give up large areas of its territory to suck in large numbers of Soviet troops, and thereupon to conduct the kind of guerrilla warfare against them which would include all kinds of techniques, some known only to the Chinese, such as tunnel warfare, to undermine, to eat away at the invading forces, and subsequently to defeat them by the doctrine of the people's war. For this purpose it has been necessary in the past for the People's Liberation Army to be equipped in a fairly austere, one might almost say primitive, way. Some people have called it the rifle and millet army; that is to say, it is an army which has very simple weapons and very simple means of living and subsistence.

This is changing at the moment, and changing in a way which I think requires all of us in the West to take careful note of what is happening. As we have already heard in the debate this afternoon, there are four modernisations taking place in the Chinese economy: agriculture, industry, science and technology, and defence. Defence, in the concept of the Chinese Government, comes quite deliberately last. They will not devote great resources to the modernisation and improvement of their military strength until they have created the infrastructure of agriculture industry and science and technology.

At the moment the Chinese spend somewhere around 6 per cent. of their gross national product on their defence forces—somewhat more than we do, somewhat more than the average inside NATO, but considerably less than the Soviet Union. But they have taken the conscious decision that until the industrial and scientific and technological infrastructure of the country has been brought into the modern world they will not turn their attention to their armed forces. But when they begin to turn their attention to their armed forces—and the planning has already begun because the Chinese tend to plan far ahead—they are going to require from the West (at least I think they are going to ask for, or expect, from the West) some considerable help in modernising their armed forces.

The ground forces of the Chinese army are going to require such things as surface-to-air missiles to deal with the air threat which they perceive from the Soviet Union; anti-tank missiles and anti-tank systems, because of course the major perceived threat to China from the Soviet Union is from the million troops in the armoured divisions which are ranged along the frontier between the Soviet Union and China. Their air force are going to require such things as airborne early warning systems to give them warning of attack. They are going to require also such forms of equipment as—if I may use such an expression in your Lordships' House—helicopters. They are going to require in their navy target acquisition radar systems; torpedo systems; and in fact all the apparatus of modern military technology.

Some of our defence industries are already engaged with the Chinese in trying to fill some of these needs. Some of our more forward-looking industrial concerns are in close consultation with the Chinese about the kind of equipment they might need. But I should simply like to say one or two things about this kind of collaboration between us. First, it is, as I have suggested, long term. The Chinese do not place the modernisation of their armed forces very high in their list of priorities. It is some way ahead.

The Chinese of course, as your Lordships will know, have a somewhat different view of the passage of time from that which afflicts us in the West. You will possibly know of the Chinese diplomat who, at the time of the negotiations in Paris at the end of the Vietnam war, was asked what he thought had been the impact of the French Revolution on the political development of China. He thought for a moment and said, "It is too early yet to say". That underlines the kind of timescale in which the Chinese view the passage of events.

Therefore, I would simply say to those who are thinking, as I hope they are, of assisting the Chinese in the development of their defences not to be too impatient. Things will go very slowly. Things always go slowly in China. I hope nevertheless they will not be discouraged, because your Lordships may recall that one of our late colleagues in your Lordships' House, Lord Cameron, who was once Chief of the Defence Staff, said in the course of a visit to China that we had a common enemy; and I believe we have. I shall not go deeply into this now because time does not allow. However, I think that we should bear that in mind.

We should not think in terms of such things as military alliances. That would be over simple and would not indeed be welcome to the Chinese. But I hope that we shall bear in mind, when we look at China and at the development of its armed forces, not just the commercial advantage that may accrue to us in the West and the United Kingdom, but the fact that for us the People's Republic of China is a strategic element of enormous importance.

5.4 p.m.

The Earl of Bessborough

My Lords, it is always a pleasure to take part in a debate on China initiated by the noble Lord, Lord Rhodes, who, as we have heard, has led so many missions to that country, and is so much beloved by our Chinese friends, some of whom I see in the Gallery. As a Knight of the Garter he must be very happy to know that Her Majesty the Queen will be visiting the People's Republic in October.

My own role has been much more modest but nonetheless most interesting. I have only led two missions. The first as a member of the European Parliament in 1977 at the time of the return of Deng Xiaoping and much talk of the four modernisations, and the second in the Autumn of 1984 at the time of the signing of the Hong Kong agreement. Our mission was concerned with high technologies and included the noble Lord, Lord Kearton, and my noble friend Lady Airey of Abingdon, as well as a United Kingdom Chinese-speaking member of the European Parliament, and representatives of British high-technology industries. We were also briefed by very many well-known firms.

Our object was to show the Chinese that it was not only the Japanese and the Americans who were capable of assisting China in developing new technologies, but that Britain and the European Community could also help them. Our discussions covered energy, aviation and space technology, information technology, and the fifth generation of computers, and perhaps above all computer integrated manufacturing which, as Sir Henry Chilver said only yesterday, is now essential.

Over 10 arduous days we had numerous meetings with our Chinese friends on these subjects, when we informed them of British contributions in these fields both nationally—for example, through the Alvey programme—and internationally with the European Space Agency and the EEC's European Strategic Programme on Research in Information Technology. One highly-qualified member of our team also initiated important discussions concerning the development of fibre optics, especially in communications.

I cannot this afternoon summarise our 100-page confidential report. All I will say is that I hope those most interested and likely to benefit from it have read it. Certainly there have over the past year been very important follow-ups resulting from this mission.

As I have said, it so happened that we were there at the time of the signing of the agreement over Hong Kong, and there is no doubt that this agreement has produced a favourable climate for Britain, as other noble Lords have said: a favourable climate for Britain not only to continue trading with Hong Kong itself and, as the noble Lord, Lord Greenhill, said, having partners there, but also to co-operate with the Republic in high technological industrial and commercial sectors.

We must all be very happy to note, as the noble Lord, Lord Rhodes, and my noble friend Lord Limerick have done, the changes which are taking place in that country and in the economy of the Republic, and the immense possibilities in the expansion of trade to the mutual advantage of the Republic, the United Kingdom and the European Community as a whole, with whom in certain cases I believe we should co-operate.

We must remember that China's total imports are annually now in excess of 40 billion dollars, according to Chinese customs' figures. In quoting these of course I am not forgetting that with a population of over one billion perhaps these amounts may not be considered so very large. Moreover, as I understand it, since 1950 over 644 billion Yuan (the equivalent might be some £250 billion) of new fixed assets have been added to the infrastructure, thus enabling China's economy to develop to the point where the Republic now produces more grain and cotton than any other country in the world, and is second only to the United States in meat production.

I also gather that its steel and energy output have grown to make China one of the top six producers in the world. Along with increases in other industrial and agricultural items, such as modern electronic, petrochemical and defence industries, this has resulted in what I think we must admit is a considerable annual growth averaging 9.2 per cent. in the nation's gross output value over the last 35 years.

I wonder whether my noble friend Lord Young—who himself in leading two prestigious delegations has also played a most propitious role in developing our relations with China—would more or less agree with my facts and figures.

I have also noticed considerable improvements in the cultural life of the people. Since 1949 I understand that there are now more than 10 times the number of students in institutions of higher education and, incredibly, nearly 37 times as many middle school students. This brings me to the point about training which was mentioned by the noble Lord, Lord Saint Brides. I express the hope that, if the Government cannot, due to financial constraints, assist in bringing more Chinese postgraduate students over here, private firms might find it possible to sponsor more students in our own establishments. The number of Chinese students going to Japan annually is many thousands. I was given the figure of 7,000. As the noble Lord, Lord Saint Brides, said, many thousands go to the United States, whereas only a few hundred come to Britain. My noble friend Lord Young and I have had correspondence on this subject and I should be glad to have his latest views on it.

Anyone wishing to increase trade with China should study the proposals, as I have, in the seventh five-year plan for 1986 to 1990 which was adopted in September last.

Finally, like the noble Lord, Lord Nelson, I should be grateful to my noble friend the Secretary of State if he would give us the Government's latest views on soft loans to China. I gather that these have been initially set at £100 million sterling, and that will enable British firms to compete on more equal terms with their main competitors. I wonder whether there is any chance that this limit of £100 million may be increased. It is most distressing that Britain should be responsible only for not much more than 1 per cent. of China's imports. Anything that can be done to increase this percentage should, in my view, be applauded.

I am most grateful to the noble Lord, Lord Rhodes, for moving this highly significant Motion. I end with this: my daughter who reads, writes and speaks Chinese is at this moment flying to Beijing on her third visit. On arrival she will certainly be saying "Happy New Year" in Putongua which is the common tongue.

5.14 p.m.

Lord Bruce of Donington

My Lords, I should like to join in the tributes that have been justly paid to my noble friend Lord Rhodes for having introduced this Motion this afternoon, and for having spoken so eloquently on it. I must confess to feeling at some disadvantage in your Lordships' House this afternoon because to the best of my knowledge I am the only speaker who has never set foot in China. This places me at some considerable disadvantage since the knowledge I have learned of China is limited. My earliest association with Chinese affairs was in 1932 when I recall, as a very young man, joining in widespread demonstrations in the City of London in support of China on the occasion of the invasion of Manchuria by the Japanese. With many others I participated in campaigns to provide medical aid for China. For the rest, my information on a personal scale has been derived from the noble Lord, Lord Rhodes, with whom I have had conversations, and also with the noble Earl, Lord Bessborough, who is an expert on this subject. I have been very fortunate in having some personal contacts with embassy representatives in London.

This Motion is essentially about the expansion of the trade relationships and trade generally between the United Kingdom and those very great people of China. The problem is very considerable indeed. We talk of the export efforts that we have made, but to the best of my knowledge our exports to China now are under 0.5 per cent. of the total exports that leave this country. Our imports are under 0.4 per cent. These are very small figures. Moreover, the balance of trade between the United Kingdom and the People's Republic of China has deteriorated remarkably over the past six years. I speak to the end of 1984 only: the figures for 1985 are not yet available to me. But in the years 1982–1984 inclusive our deficit in trade with China was £169 million, which works out at about £23million or £24 million per annum, and again in the preceding 17 years we operated at a total surplus of some £68 million or about £4 million a year.

I am not attributing either praise or blame for these figures; but clearly if we are to make an impact on our trading relationships with the People's Republic of China we have to make a considerable effort from the United Kingdom. Our imports from China in the main consist of yarn, fibres, animal hair, bristles, finished textiles, a comparatively small amount of manufactured articles and significant amounts of food. But they do not amount to very much.

I assess the speeches that have fallen from the lips of your Lordships this afternoon as evidence of a united determination that this trade with China should increase. The exports we have so far been able to make to China have been in specialised machinery, certain items of transport, iron and steel, very occasionally of copper and we have also been supplying a considerable amount of technical control machinery and technical and scientific apparatus. This has been one of our largest exports.

It is interesting to recall that about 20 years ago we must have exported an aircraft to them. It seems, at any rate from the figures that I have been able to obtain, that we have not sent them any aircraft since. This seems to be somewhat of an omission. Nor, I am afraid, have we been very active in the shipping field.

In the very limited time available to me, I do not propose to cover ground that has been covered by other noble Lords, particularly in the light of the contribution we may confidently expect from the noble Lord, Lord Young of Graffham, whose efforts in China are, I can assure him, warmly appreciated by those of us on this side of the House. Nevertheless, I am afraid it is true that we have to reappraise the financial background within which our international trade operates, and more particularly in the case of China.

Noble Lords this afternoon have referred to the limitations of China's import capacity due to the lack of foreign currency reserves. I am well aware, and the noble Earl, Lord Bessborough, referred to this this afternoon, of the recent—I presume agreed—line of credit of some £100 million, bringing us more into line with the credit to China that has been made available by other countries. I ask the Government to give this more serious thought than perhaps they may have given it in the past.

I am well in the recollection of your Lordships' House in pointing out the virtual "squandermania", by which money and credit were poured out of the United Kingdom and other countries into South America. If we then could afford to advance these sums, many of which were spent on items far less laudable than those that the People's Republic of China have in mind, surely we can go beyond the mere £100 million. Our finances appeared to be capable of sustaining the £7,000 million spent on the Falklands War, with scarcely a ripple. The £5,200 million which, according to the Chancellor of the Exchequer was a financially sound expenditure in connection with the miners' strike, apparently occurred without undue financial restrictions.

I am not asking and would not dream of asking for undue expenditure to be adopted. However, I am firmly of the opinion that this Government have to give their industrial base in the United Kingdom, particularly in their dealings with overseas countries, just as much financial and other co-ordinated support as the governments of Japan, the United States and Germany. There has to be a co-ordinated effort; there has to be a substantial effort, and that effort has to be made by the British Government.

I have already said that I wish to defer to the noble Lord. I wish him well. I also congratulate the noble Lord, Lord Rhodes, on initiating such a very interesting and constructive debate this afternoon.

5.24 p.m.

The Secretary of State for Employment (Lord Young of Graffham)

My Lords, perhaps I may start this afternoon by joining in the congratulations to the noble Lord, Lord Rhodes. I, for one, feel, and I suspect I express a feeling on all sides of the House, that he was indeed making Rhodes scholars of us all when he gave us a panoramic view of his long association with China. Indeed, there could be few more appropriate days on which we could have a debate of this nature, for it marks not only the start of the Chinese New Year, the Year of the Tiger, but this week also marks the start of the first year of the seventh five-year plan. When I went to China in December, it was a very appropriate time to discuss the forthcoming capital and infrastructure investments which the People's Republic would then be making.

Perhaps I may take up one or two points that the noble Lord, Lord Rhodes, made. I, for one, should like to pay tribute to the work of the embassy and the work which has helped both the missions that I have had the privilege of taking to China. I think the work of our officials there is remarkable. There are those who say that the term is too short, but a tour of three years in China must be preceded by two years learning the language, and many of our people come back for a further tour. I believe that those with whom I have had o deal pay tribute to the skill in the Chinese language and the commercial skills of our embassy, though of course we can always improve and I have no doubt at all that changes that are being made at the present time will result in a better commercial service for those of our countrymen who go out to China.

The noble Lord referred to the BBC and to its new transit station in Hong Kong. It would indeed be good if Her Majesty the Queen could open the station on her visit to Hong Kong but, alas, that is impracticable since it will not be finished until the end of the year. At the present time, of course, the BBC is broadcasting some 10½ hours in Mandarin and five-and-a-quarter hours in Cantonese every week. I think it is important that that work should continue, and I hope the new transmitter will make that even easier.

My noble friend Lord Geddes referred to the size of the shipping industry. It is indeed formidable in China. I was made aware of the need for container ports in the 14 coastal cities. Some conversations which I carried on last March with members of my delegation I believe are proceeding very satisfactorily and I hope that we shall find that there will be United Kingdom technology very much in use in some of the new ports which are coming through.

The noble Lord, Lord Mackie, paid tribute to the skills of the Chinese in agriculture. Although our embassy does not have an agricultural attaché, as he requested, there is a member of the embassy's commercial department whose responsibilities include agriculture and who devotes much of his time to this sector. I very much agree with the noble Lord on the importance of this sector, in which there are great opportunities for United Kingdom-China cooperation. Indeed, on my mission last March one member who was involved in the food processing industry received a great deal of interest and support. He was shown a flour mill which his company had built in 1928 and which was still running in 1985 with 85 per cent. of its original parts. I am sure that your Lordships will agree that that is a great tribute to British industry—though it cannot all be good since he was told that the machines were working so well that there was no need to replace them yet!

I am very grateful indeed to the noble Lord, Lord MacLehose, for his remarks and for his attention, once again, to Hong Kong as being a gateway to China. His view of the prudent growth of the Chinese economy should be of great encouragement to our exporters. Of course, his knowledge of Hong Kong and the role which I think Hong Kong will increasingly come to play as a staging post between British industry and our potential customers in China is second to none. It is a role which more and more of us are predicting will be of increasing and invaluable help in the future.

When I am in Beijing I read each morning the English language paper, and I should like to pay tribute at this moment to the Thomson Foundation for its help: help which my noble friend Lord Campbell has pointed out. It is of great assistance to not only those of us who are visiting China but very much to the Chinese population, whom it helps to learn English. Nowhere I think is there a better example than in China of the fact that English is becoming the world's commercial language. Also, I must pay tribute to the BBC for its great work in this regard. During the recent visit last summer of the Chinese premier, the star of "Follow Me", Miss Flower, received, I think, quite as much attention from our Chinese visitors and friends as anyone else in this country. That programme of course is invaluable and I am delighted to hear that it is continuing.

The noble Lord, Lord Greenhill, pointed out very correctly the need for staying power in commercial companies going to China. Patience is a virtue but it is also a necessity in commercial negotiations. I think that the more we realise, as I believe many United Kingdom companies realise, that it is not in our interests to look for short-term profits instead of looking for longer-term involvement in a series of partnership arrangements in joint ventures, in helping Chinese technology and in helping the development of the Chinese economy, the more I think our trade will build on the signs that it has begun to show of real and serious growth.

The Government are well aware of claims, and claims for defaulted bonds, and this matter is under constant review. I can assure the noble Lord that not only is it under review but I hope that formal negotiations in this regard will begin in Beijing in May and I hope that they will come to a good conclusion.

I was very interested in the contribution of my noble friend Lord Nelson. I should congratulate him as a director of the company, and indeed on his company, on the efforts resulting in the signing of the contract relating to the Daya Pay nuclear plant. It took a long time but I hope that all would agree that it is worth it in the long run. I hope that it will mark but the beginning of a long series of formal arrangements and commercial contracts between United Kingdom companies and China in the field of power generation. It was pointed out to me and became self evident time and again that China has enormous demands for both thermal power stations and nuclear power stations. I hope that we shall be able to play our full part to our joint mutual advantage. Since, alas! I do not have the details of the embassy staffs of our principal competitors, I will undertake to write to the noble Lord with that information.

I hope that all noble Lords greatly enjoyed the account which the noble Lord, Lord Saint Brides, gave of his discussions with Chairman Zhao and heeded his warnings about the rapidly-changing social and economic scene. He also drew attention to a matter which has concerned me greatly and concerns the Government. Share in that concern was expressed by my noble friend Lord Bessborough. It is true that we only had 800 Chinese students to this country in the last academic year but that has increased to 1,200 and we are now having discussions and looking for ways in which we can see this increase by a further 50 per cent. Of course, it is not as many as the United States of America but the USA is far nearer to China and a very much larger country. However, it does compare with our principal European competitors. It is our earnest wish to see far more Chinese students come to this country not only at university and post-graduate level but even at that much more important technician level which is so necessary for the growth of the Chinese economy.

The noble Lord, Lord Oram, drew attention to a doubling of the output between 1980 and 1990 and to the greater potential of China as a market. No one who has had anything to do with China can be other than amazed at the enormous growth that has occurred over the last few years, a growth which shows every signs of continuing and a growth which bodes well for future trade in this country.

My noble friend Lord Limerick quite rightly said that there were no inhibitions on the transfer of technology from the City of London to China. Indeed, I think there is great potential not only for the transfer of technology but for co-operation and growth between China and the City of London, because the City of London operates on a basis of trust and indeed in many ways on an "old friends" basis. I believe there exists in China a desire to trade with the United Kingdom. The noble Lord says that the prospects for visibles are good and for invisibles better. I hope that he will come to the conclusion that the prospects for both are extremely good.

The noble Lord, Lord Chalfont, gave us a very good view of the defence opportunities in China not so much in the area of the defence capabilities of China itself as in the opportunities that will exist in the years to come for our defence manufactures. This requires long term planning and it requires patience and I hope that our manufacturers will be in a position to exhibit both.

Finally, may I pay tribute to my noble friend Lord Bessborough not only for his mission last year but for the opportunities for co-operation in technology which are coming out of that? He drew attention to the size of the market and the amount of imports and capital fixed investment. Once again, studying those figures and studying the rate of the growth of those figures, it brings home to us just what our opportunities are. The noble Lord, Lord Bruce, of Donington, said that our exports to China were only 4 per cent. of the exports of the United Kingdom. But of course the United Kingdom is one of the largest exporting countries in the world in proportion to its size; and 30 per cent. of our GDP is exported and always has been. Chinese imports from the United Kingdom were just under 2 per cent in the first half of 1985. They are now showing a considerable growth. Exports were up 24 per cent. for the first 11 months of 1985.

Those 10 members of my mission who came with me last March have up to now signed agreements for over £500 million-worth of contracts, which will be represented in the trade figures of the years to come. More than that, there are many other manufacturers and businessmen of ours in China today. I hope we shall, as the years go by, come back to where we were in China; we had about 5 per cent. of Chinese exports in 1970. The market is growing and we must run fast to stand still but I hope we shall be able to run with it.

The noble Lord, Lord Bruce of Donington, said that the Government should think about soft loans. I am glad to assure your Lordships that on my visit to China in December I was able to assure the Chinese Government that not only were we contemplating a soft loan facility of £100 million but that we would increase this substantially; and within the next month or two officials of the Chinese Government will be here and I hope we can take that further.

There are many opportunities in China and there are many contracts between our two countries. It is a matter which will not be settled in a day. High level visits continue and I look forward with great interest and anticipation to the visit this summer of Hu Yaobang the Chinese Communist Party leader, who will be coming here. I hope that that will further cement relationships between us but nothing will cement relationships between our two countries so much as increasing trade to our mutual advantage.

Lord Rhodes

My Lords, to wind up the proceedings, I did not mention in my speech the suggestions that I made with regard to the funding of post-doctorate graduates coming to this country, because of the delicate nature of the negotiations about it at the moment. The noble Lord will understand what I am talking about because he knows all about it.

I thank those who have taken part in the debate. I think it has been constructive and informative, and I hope that it will not be too long before there can be a major debate not only on this topic but on the one needed on the annual report which was promised to us about the Hong Kong settlement. I thank the Minister for his attention and for his reply. I hope it will not be too long before we have the opportunity of discussing the matter again. I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.