TNAG-2346-FCO40-3415-Political-relations-between-Hong-Kong--Japan-and-China-1991 — Page 126

CODE 18-77

Airport

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Reference

4. Mr Paul noted that the airport had an important symbolism and therefore could disproportionately affect future confidence. There could be a damaging practical effect on the 5.5% predicted growth rate if it did not go ahead. Reduction in the growth rate would in turn reduce government revenue and should it become necessary to then increase taxes or cut expenditure, that would have a further knock-on effect on the financial situation. The ironic point was that both sides agreed that there needed to be a new airport. The key to progress would be to set aside issues of principle and concentrate on practicalities.

MFN

5. Miyamoto said he had discussed MFN extensively during his visit to Washington the previous week. Prospects this year were worse than last. MFN seemed to be Bush's only weak point on foreign policy. Democratic tactics seemed to be to seek to delay the issue until next year but to insert conditionality (it could then be ratcheted-up). The linkage between the human rights lobby and proliferation lobby strengthened the opponents' case. Even the China hands in the Administration were unhappy with recent Chinese performance. The supply of missiles to Pakistan in particular had served to establish an image of the Chinese as liars. Although Japan strongly favoured maintenance of MFN they were not lobbying in Washington: this would be entirely counter- productive given the anti-Japanese sentiment on the Hill. Bush himself seemed to be tiring of China. The Japanese were watching for signs that the US would seek to use G7 as cover for maintenance of MFN.

Miscellaneous

6.

Looking ahead to local elections in Hong Kong, Miyamoto commented that the Hong Kong Chinese remained very vulnerable to indirect pressure from Peking. They were well aware that there would be a change of leadership shortly and that this could have unpredictable consequences. Once the UK had left Hong Kong he suspected there would be a decline in our interest in Asia. (Mr Paul argued our continuing interests on familiar lines).

7. Miyamoto also commented on the proposed 700 billion yen energy loan to China. The Chinese request for this sum of money had been written on no more than two sheets of paper and was hopelessly inadequate.

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DH Powell

First Secretary

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