TNAG-2182-FCO40-3119-Hong-Kong-nationality-international-support-1990 — Page 49

CONFIDENTIAL

stalled on account of last year's events.

They have subsequently

made it clear that the language adopted at the Summit provides cover

for their going ahead with the Yen Loan. There have been a number

of technical meetings between the Chinese and the Japanese on the

loan. Initial feasibility studies are now complete and it has

apparently been agreed to disburse the loan in three stages; in

September, December and February/March 1991 respectively. The Japanese have told us that they would for the time being however,

wish to avoid giving China the impression that the tap had been

fully turned on. The emphasis of the first tranche would therefore

be on reinforcing support for projects already underway; supporting the living standards of ordinary Chinese; supporting progress

towards economic reform. The loans will be untied.

3.

The Japanese have for the most part adhered to the other

measures adopted by the Paris Summit. But there has nonetheless

been a steady flow of senior Japanese politicians visiting China,

often former members of the Government, which has maintained the

impression of a high level of Japanese interest in resuming normal relations with China. A wish to keep in step with Western partners is now the main factor preventing a complete return to business as

usual. Former Prime Minister Takeshita is to visit Peking in

September (to mark the opening of the Asian Games in Peking).

may visit as a personal envoy of Prime Minister Kaifu.

EC/China Relations

He

4. We have continued to argue within the Twelve for a further

relaxation of the EC policy towards China. In particular, we have

sought a relaxation of the suspension of high level and ministerial

visits and of the ban of new concessional finance (we have not

sought relaxation of the suspension of arms sales or of high level

military contacts). A further round of informal contacts with EC

partners following the Houston Summit revealed a continuing lack of consensus for such a relaxation, with France and Holland taking a

hard line. The position is likely next to be reviewed at ministerial level following the proposed EC Troika Ministers meeting with Chinese Foreign Minister Qian Qichen at UNGA in September.