TNAG-2050-FCO40-2920-Visits-by-Lord-Caithness--Minister-of-State-for-Foreign-and--1990 — Page 33

CONFIDENTIAL

In 1989, the Japanese invested US$1.46 billion in Hong

Kong real estate out of US$1.92 billion invested by all

foreign and domestic sources.

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The major Japanese retailers are also continuing to expand in Hong Kong. According to Nomura Research

International, Japanese department stores now account for some 40% of all department store sales in Hong Kong.

3.

Given the weak performance of the Japanese stock market and Japan's other economic difficulties, Japanese businesses are now operating in a difficult environment and are pulling in their horns worldwide. But the continued growth in the activities of Japanese institutions shows that they are still bullish about investment in Hong Kong.

PADS

4.

However there is evidence to suggest that Japanese banks (like the rest of the international banking community) are adopting a very cautious attitude towards PADS and will be

reluctant to provide finance without a Chinese Government

'guarantee' Lord Caithness will wish to reassure the

Japanese that we are doing everything we can to secure Chinese support.

5. HMG is strongly backing the Anglo-Japanese consortium

(Trafalgar House/Costains/Mitsui) which is expected to bid

for the Lantau Fixed Link and the Airport Platform. It

would be helpful if Lord Caithness could reassure his

Japanese interlocutors of our commitment to the consortium

and our wish to see it succeed.

Hong Kong/Japan Air Services

6.

The Japanese Ministry of Foreign Affairs was first provided with a draft Hong Kong/Japan ASA text in August

Although there are no differences of principle or

1987.

POMACB/4

CONFIDENTIAL