CONFIDENTIAL
Not now he won't
Hong Kong
7. Mr Donald explained the difficulties of talking even to friends about the Hong Kong talks. It was important not to say anything that could be misconstrued in Hong Kong or Peking. The central issue was the need to achieve for the people of Hong Kong a solution which preserved commercial confidence in the territory and ensured Hong Kong's continued stability and prosperity. Japan could help by showing faith in Hong Kong under the present system. The Japanese Government should be aware of, and should not be persuaded by, Chinese 'united front' tactics of pretending that Britain would be happy to surrender sovereignty. The Japanese Government should also explain to the Chinese the importance of a convertible currency and the open market system.
8. Mr Nakajima recalled that during his visit to Peking in March the Chinese Foreign Ministry had for the first time shown great interest in international economic matters; he had taken along a Japanese economic specialist to brief the Chinese. Mr Fujii said that Liao Chengzhi, who had been born in Japan, would be visiting Japan in August, and the subject of Taiwan, which was of increasing importance for China and had a bearing on Hong Kong, would no doubt come up. Japanese business was confident of a satisfactory solution for Hong Kong and was generally bullish about the future. Two new Japanese banks had recently opened in Hong Kong, bringing the total to 13, and the Nomura insurance company had moved its Asian HQ to Hong Kong. The Japanese Government encouraged this
sentiment.
Afghanistan
9. Mr Donald said that the UN Secretary General was very active in trying to find a solution to the Afghanistan question. Perez de Cuellar was a professional optimist who believed the Geneva talks could show progress. British contacts with the Soviet Union, however, suggested that no change in the Soviet position was likely. Although Pakistan might be hesitating, Yaqub Khan had been very robust in talks with the FCO. Mr Nakajima said that the UN Secretary General had emphasised the importance of the Geneva talks to Mr Nakasone during their recent talks, but Perez de Cuellar seemed over- optimistic of a UN solution. President Zia was expected to visit Tokyo in July and his views would be heard with interest.
Brunei
10. Mr Donald said that press reports of serious disagreement between the UK and Brunei were without foundation. He explained the position reached after Lord Belstead's recent visit.
Far Eastern Department
13 June 1983
3 - CONFIDENTIAL
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