CONFIDENTIAL
3. Mr Giffard said that he broadly agreed with Mr Nakajima's analysis. As for the Sino-Soviet talks, the UK was not among those Europeans which expected much progress. Mr Donald added that Premier Zhao had used the word 'marathon' to describe the Sino-Soviet talks to Mrs Thatcher in September 1982. More generally, China seemed now (since the 1981 Party Congress) to be returning to her foreign policies of the 1950s.
China
4.
Mr Fujii said that it was unlikely that there would be dramatic developments in China in the short term. But the Chinese tended to see the Soviet Union as being ideologically safer than the West as a trading and cultural partner. It would be important for the West not to drive China towards the Soviet Union. Moreover, since the adoption of the historical resolution at the Sixth Plenum there was an increased emphasis in Chinese policy on nationalism, particularly over Taiwan. We should avoid stimulating this tendency.
5. In the Sino-Soviet talks, China had put the main focus at present on Vietnam. The Vietnamese were being nervous about the possible effects; they had put pressure on Kapitsa not to accept any compromise. The Russians had given them repeated assurances. Recent developments included the expulsion of Chinese nationals from Mongolia: one possible interpretation of this was that Mongolia feared Sino-Soviet rapprochement and so had created tension to block it. The real reason, however, might lie in Mongolian agricultural policies; the Mongols were bad at farming and needed to get the Chinese to work on their farms. Another recent event was the rumour circulated by the Russians in Peking that China had decided on a negative attitude in the Sino-Soviet talks; this was unfounded in fact, and reminiscent of the April 1981 story put about by the Russians that Sino-Soviet relations were fast improving.
6. China was pursuing two incompatible goals - modernisation by means of capitalist incentives, and the preservation of socialist integrity. This had led to greater internal dissatisfaction, as shown by Hu Na's defection to the US and other recent escapes, and by the CAAC hijack. China wanted Western capital and technology but realised the consequences for internal dissaffection. In Sino- Japanese trade, Japanese businessmen had lost interest at the end of 1981 but were now looking again at the opportunities, particularly in steel and petroleum-related industries. But it was very difficult to do business with China; there had been four Sino-Japanese joint ventures five years ago, and there were still only four today.
2 - CONFIDENTIAL
/Hong Kong