Number: [blacked out]

Primary: Asia China

Sent: China, November 9, 1986 [blacked out]

Received: MOFA, November 9, 1986 [blacked out]

To: The Foreign Minister

From: Ambassador Nakae

The Prime Minister’s Visit to China (Meeting with Premier Zhao – Investment in China, Introduction of Bilateral Economic Issues)

No. 3771 Secret Top Urgent [blacked out]

Outgoing Telegram 3770 Separate Telegram 1

(Prime Minister Nakasone)

1. Japan and China are in a complimentary relationship in the fields of politics and economics. Our country’s basic policy is, in particular, one of expanding and balancing trade and cooperating in China’s modernization. We are resolved to strongly promote this policy now and in the future as well.

2. The global economy is now encountering great change. At the recent Tokyo Summit, there was a need for policy coordination by every country in order to overcome the economic crisis. The importance of structural reform was pointed out. Particularly in regard to the area of currency exchange, there was a confirmation of proceeding in the direction of long-term stability in maintaining the floating exchange rate system and in carrying out oversight and review. In addition, such problems as Japan’s trade surplus, the United States’ trade and fiscal deficits, and Europe’s unemployment and sluggishness in adjusting its industrial structure were indicated.

3. Our country recently passed a supplementary budget of 360 million [yen], and we are working to expand domestic demand.  In addition, the official discount rate has been lowered to 3 percent. On the basis of coordination with the United States, the relationship between the yen and the dollar now reflects the basic economic conditions of both countries. There is no need for further appreciation of the yen, which has been confirmed by a note signed by US Treasury Secretary Baker and Minister Miyazawa.  In addition, the work of reducing the trade surplus and transforming the Japanese economy into a type based on international coordination is being advanced with myself (the Prime Minister) as headquarters director. For example, a plan has been drawn up to reduce coal production from 16 million to 10 million tons. It includes ruining a town or two, but we are resolved to implement it.

4. Our country is also working to restore the trade balance with your country.

5. Concerning the issue of direct investment, we appraise the “State Council Regulations for Promoting Foreign Enterprise Investment,” recently published by your country, for its content from the viewpoint of improving the investment environment. Before this visit to China, I heard from financiers, the Ministry of International Trade and Industry (MITI), and others on what kinds of barriers there are. If necessary, I would like to introduce them later.

6. Regarding the promotion of economic exchanges with China, I would like to promote close consultations now and in the future as well.

(Zhao Ziyang)

1. In recent years, economic relations between Japan and China have been generally and relatively developing, and the fields and scale of cooperation have been expanding. We value your efforts since taking office, Prime Minister, for the development of economic relations between China and Japan.

2. I think one can say that the economic relationship between China and Japan is encountering a deeper and wider stage of development. That depends, for your country, on the adjustment of the present economic structure, that is to say, on the advancement of policies for the expansion of imports and the increase of foreign investment and, for China, on the further expansion of exports and efforts to introduce foreign capital. The economic relationship between China and Japan has in the past been a complimentary one. In addition to that, beneficial conditions have thus arisen at present for developing a relationship of economic cooperation on the basis of equality and reciprocity. I consider this both a good opportunity for both countries and a challenge as well.

3. China is resolved to promote, now and in the future, on the basis of the Four Principles of Sino-Japanese relations, the development of an even more active and open economic relationship with Japan.

4. Through our cooperation in the economic field, I would like to discover new means and to expand the scale and scope of cooperation. In three fields in particular, namely funds cooperation, joint enterprises, and investment, if we are able to achieve new results, I believe it would be suitable for greeting the 15^th anniversary of the normalized relations between China and Japan and the 10^th anniversary of the China-Japan Treaty of Peace and Friendship.

5. Today, I would like to propose three issues: trade, funding cooperation, and joint enterprises. (End)