TNAG-2346-FCO40-3415-Political-relations-between-Hong-Kong--Japan-and-China-1991 — Page 34

economy with know-how, technical aid and intellectual support. They we not yet ready to embark on financial assistance for big projects. The Japanese were pursuing investments in the Soviet Far East but, there again, they were not yet contemplating large scale

projects. But they might become involved in the future.

6. Mr Kawai (Komatsu) said that Japan had big Eastern countries as neighbours China and the Soviet Union and it was necessary to

maintain stable relations with them. There was a need for stable economic development now that there was a shift towards a market economy in the Soviet Union. He hoped this would lead to stable growth and contribute to peace in East Asia and the world. Japanese relations with China had improved. The bitterness of the war years

and the events in Tiananmen had now been overcome and the two

countries were now enjoying economic cooperation. The Soviet Union had, until recently, to bear in mind the distinct difference between

the communist and capitalist systems. The Soviet Union was now changing; there would be more room for manoeuvre in Japan/Soviet relations but Japan would be watching developments closely. Japan

did not believe there would be another coup in the Soviet Union but

was concerned about internal problems which could be brought about by food shortages. The Japanese were uncertain as to whom to talk when proposing cooperation projects. They were not sure with whom

the decision lay. There was a semi-national project deal, signed in

October 1991, for the develoment of Siberian forestry resources, but

because of the chaotic internal situation the future of the project was uncertain. The Japanese wished to extend humanitarian aid, managerial know-how and intellectual support to the Soviet Union. They also wished to help with the transformation of military technology to industrial purposes to help increase Soviet exports.

We

7. The Secretary of State said that the UK's approach was similar. wished to concentrate on food aid and technical assistance for food and energy distribution. The right conditions have not yet

been met for large scale financial help.

8.

Taking up Mr Kawai's mention of China the Secretary of State said he had one point to make. We had been grateful for the quiet, unofficial help from Japanese Government and business in reminding