RESTRICTED
- In private contacts, the Chinese were taking a very tough line. They claimed that Tiananmen Square was a minor internal difficulty. Meanwhile, policy had not changed. Per contra, the Western countries had made a substantial shift in their attitude to China. It was up to them, therefore, to take the initiative in order to restore normality. The Chinese could be budged from this position (Ishihara).
The Chinese economic plight was becoming increasingly desperate. Western companies were switching procurement away from China for prudential reasons. C Itho's current procurement in the textile and footwear field was one fifth of the level pre-Tiananmen. Most of this business had gone to Indonesia, which was consequently enjoying a boom (Akimoto).
- There was a possibility of resumed World Bank activity since the Bank based its judgements on exclusively economic rather than political criteria (Shimamoto).
RELATIONS WITH THE UNITED STATES
10.
This discussion was introduced by Mr Fujii. Japan detected two opposing currents in US thinking; what he termed the "revisionist" on the one hand and the interdependent on the other. The revisionist attitude stemmed from a high level of emotion about Japanese trade practices and allegations about protectionism. Worse still were the outraged reactions in the US to Japanese investment, particularly in real estate. Interdependente was the right slogan for the future but it was not getting an adequate hearing. The "revisionists" failed to grasp the risks, particularly to the US/Japanese security treaty. This had lost much of its military raison d'être. But it had become a vitally important strategic mooring for Japan. The revisionists risked cutting Japan loose from that mooring. His message to his British friends was that we must speak up on behalf of common sense. Our voice was listened to in Washington. Jap-bashing was dangerous.
11.
Other points:
-
The prospect for substantial change in the US deficits was unlikely. Yet these deficits remain the key to the problem. There was no likelihood of the Americans tackling them in a robust way without a vast increase in the level of savings in the US and this was simply not in prospect (Oba).
-
Fujii was right to describe American reaction to Japanese inward investment as "over-emotional".
The
RESTRICTED