CONFIDENTIAL

FM FCO

TO DESKBY 02010OZ TOKYO

TELNO 640

OF 011724Z DECEMBER 92

CONFIDENTIAL

Huz 091/2

INFO PRIORITY HONG KONG, UKREP JLG HONG KONG INFO PRIORITY WASHINGTON

PEKING, MOSCOW

FROM HEAD OF FED IN ABSENCE OF SIR J COLES

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Oh MFN

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129

122075

MDHOAN 5097

YOUR TELNO 832 AND HONG KONG TELNO 2797: JAPANESE CONSULTATIONS WITH INCOMING US ADMINISTRATION

1. We welcome Satoh's willingness to listen to our thoughts. It is nevertheless a somewhat convoluted arrangement. Regrettably, those concerned here do not feel that we can use the Japanese as a suitable channel for communicating our views on Russia to the Americans. Satoh will no doubt understand.

2. On China/Hong Kong we have little to add to the very helpful suggestions in Hong Kong TUR. If you thought it helpful you could additionally draw on some of the following points

- China/GATT: China's reaccession will have important impact in Liberalising access to its market, but important that China fully meets all GATT requirements. New foreign trade law important step forward, but still some way to go.

- Human Rights: Major Western countries share US concern. Constant pressure from all countries (Comment: including Japan) Likely to be most productive. But change will be gradual. Actions which damage China's economy/foreign trade more likely to be counter-productive.

- China Internal: Results of 14th Party Congress represent ascendancy but not complete victory for reformers in the Leadership. Hostility to China could encourage revival in fortunes of hardliners. Younger Leadership (eg. Zhu Rongji) need to be encouraged. Maintaining all forms of contact most promising way to encourage evolutionary political change.

3. DTI have suggested that you might take the opportunity of your meeting with Satoh to sound him out on Japanese perceptions of

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