Cable No. 3774, Ambassador Nakae to the Foreign Minister, 'The Prime Minister’s Visit to China (Meeting with Premier Zhao - Investment in China, Joint Enterprises)'

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, Joint Enterprises)

No. 3774 Secret Top Urgent [blacked out]

(Premier Zhao Ziyang)

1. We hope that persons in Japan’s financial circles invest more in China and undertake more joint enterprises.

2. As you indicated, Prime Minister, in order to improve the investment environment, China recently promulgated new State Council regulations, which have incorporated many of the suggestions submitted in the past by the Japanese side. With the promulgation of these new State Council regulations, we hope that more Japanese industrialists take on investment.

3.  New developments have been seen in investment from Japan in China in the last two or three years. However, compared to China’s general level of development and the investment of Western countries, the scale of investment from Japan is small and the transferred technologies are common. One point I would like to note is that Japan this year has actively engaged in foreign investment,  but investment in China has decreased. We hope that the Government of Japan adopts a policy of assistance and encouragement for industrialists in the aspect of investment in China.

(Prime Minister Nakasone)

1. I, too, am greatly interested in the issue of Chinese joint enterprises and hope that investment in China increases. I think that the State Council’s recent regulations are highly significant.

2. However, under the circumstances of the yen’s appreciation, I wondered why investment in China did not increase while investment in ASEAN and other areas did and had an investigation conducted. It seems that there are various circumstances. In short, there are such issues as high wages and land rents, short periods for joint ventures, unclear dispute procedures, and difficulties in setting prices. In addition, there have also been difficulties in foreign currency balance and foreign currency allocation, as well as cases of having to close a factory due to inability to procure parts from overseas. It is probably because of this kind of unease among industrialists that not much investment has flowed into your country, which is the closest to Japan, has abundant natural resources, and a hard-working people.

3. Recently, there has been a great deal of investment from Japan in the ASEAN countries, particularly in Singapore, Malaysia, and Thailand. All of it has been successful, becoming a driving force in exports to Japan and the United States. I think that it would be instructive for your country, too, to obtain information from each of these countries and make comparisons.

4. I hope that your country moves forward in this area, as in the recent promulgation of the State Council’s regulations, and does not miss this opportunity of the yen’s appreciation. I personally wish to encourage the investment of Japanese enterprises in China. (End)