CONFIDENTIAL
025156
MDHIAN 0236
ECONOMIC CONFIDENCE IN HONG KONG WAS HIGH. CHINA HAD AGREED IN PRINCIPLE TO THE DIRECT ELECTION OF 18 LEGCO MEMBERS BUT DID NOT LIKE THE RESULT BECAUSE THE 18 COUNCILLORS WERE CRITICAL OF CHINA. PEKING SHOULD BEFRIEND THEM INSTEAD OF SHOWING THEIR SUSPICION AND
HOSTILITY.
8. WATANABE SAID THAT WHEN JIANG ZEMIN HAD REFERRED TO CHINA AGREEING TO THE ARRANGEMENT OF ONE COUNTRY TWO SYSTEMS FOR 50 YEARS HE HAD EMPHASISED THAT CHINA WOULD SEEK NO DIRECT REVENUE FROM HONG KONG DURING THAT PERIOD. WHEN THE CHINESE HAD EMPHASISED THE IMPORTANCE OF FOREIGN INVESTMENT WATANABE HAD WARNED THEM THAT THE WRONG POLICY TOWARDS HONG KONG COULD AFFECT FOREIGN INVESTMENT.
EC/JAPAN
9. THE SECRETARY OF STATE SAID THAT WE HOPED TO STRENGTHEN EC/JAPAN LINKS DURING THE BRITISH PRESIDENCY AND WERE KEEN ON A POLITICAL DIALOGUE, FOR EXAMPLE OVER THE COMMONWEALTH OF INDEPENDENT STATES, AS WELL AS DISCUSSION OF TRADE MATTERS. THE EC/JAPAN SUMMIT WOULD BE IMPORTANT. WE WERE ASSUMING THAT IT WOULD BE MORE CONVENIENT FOR THE JAPANESE IF IT HAPPENED AROUND THE TIME OF THE G 7 SUMMIT IN MUNICH. WATANABE SAID HE WOULD ASK HIS OFFICIALS TO BE IN TOUCH
ABOUT THE DATE.
10. WATANABE SAID THAT JAPAN SUPPORTED EC INTEGRATION BUT IN SOUTH EAST ASIA, ESPECIALLY, THERE WERE CONCERNS ABOUT AN EXCLUSIVE ECONOMIC GROUP. FREQUENT DIALOGUE HELPED TO DISSIPATE SUCH
CONCERNS.
CONFERENCE ON AID TO THE COMMONWEALTH OF INDEPENDENT STATES 11. WATANABE SAID THAT THE JAPANESE HAD BEEN HESITANT BUT THE DISINTEGRATION OF THE SOVIET UNION AND YELTSIN'S PURSUIT OF DEMOCRACY AND ECONOMIC REFORM, AS WELL AS JAPAN'S FRIENDSHIP WITH' THE US, HAD PERSUADED THEM. JAPAN'S POSITION HOWEVER WAS DIAMETRICALLY OPPOSITE TO GERMANY'S: THE LAND WHICH THE SOVIET UNION HAD TAKEN FROM THE GERMANS HAD BEEN RETURNED TO THE GERMANS AND FORCES OF OCCUPATION WERE BEING WITHDRAWN. IT WAS THEREFORE UNDERSTANDABLE THAT GERMANY WAS READY TO HELP THE NEW COMMONWEALTH ON A LARGE SCALE. JAPAN'S POSITION WAS QUITE DIFFERENT.: THE WAR TIME LOSSES HAD BEEN ENORMOUS AND THE ILLEGAL OCCUPATION OF JAPANESE LAND CONTINUED.
RENWICK
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