HOUSTON, JULY 7 -- President Bush today told Japanese Prime Minister Toshiki Kaifu the United States has no objection to a resumption of Japanese aid to China, Tokyo's primary objective at the economic summit of the seven largest industrial nations that starts here Monday.

Fearful of antagonizing its allies in Europe and the United States, but feeling pressure from China and Japanese businesses, Japan sought approval to resume at least part of a bilateral $5 billion aid package Tokyo promised China two years ago. The aid was halted as part of the economic sanctions last year's summit imposed against Beijing after China's crackdown on pro-democracy demonstrators in Tiananmen Square.

Bush, in answer to shouted questions today, did not respond directly on the issue of Japanese aid to China but said that Japan is a sovereign country and "they can make up their own minds on a lot of questions. They work very cooperatively with the U.S., but sometimes they have interests that prevail."

Meanwhile, White House press secretary Marlin Fitzwater revealed that Bush sent Soviet President Mikhail Gorbachev "a rather lengthy" report on the just-concluded NATO summit from Air Force One while flying here from London late Friday. Fitzwater said Bush gave Gorbachev his "personal reflections on the summit, expressed his support for the reforms that President Gorbachev is undertaking" and added "a little personal emphasis" to what happened in London.

Last week Gorbachev sent Bush a letter dealing with issues that will be discussed at the economic summit. Gorbachev has indicated that he would like to receive economic aid from the West.

Bush's report to the Soviet leader on the NATO gathering did not respond to Gorbachev's letter on the economic summit, an administration official said. Bush plans to brief Gorbachev after the summit ends Wednesday.

The Soviet leader responded positively to the NATO declaration that the European allies are rethinking their defense strategies as the threat from Eastern Europe declines.

Bush was beaming on his way here from London over the upbeat Soviet reaction to the NATO summit, calling it "very interesting and very positive."

During their meeting here today, Bush outlined for Kaifu, the only leader at the economic summit who was not in London, NATO's new posture that "we are no longer adversaries" with the Soviet Union.

It was one of the first meetings of a U.S. president and Japanese prime minister not dogged by trade disputes, allowing Bush and Kaifu to give full sweep to the new "global partnership" between Washington and Tokyo. Reflecting that trans-Pacific partnership, Japanese spokesman Taizo Watanabe said Bush and Kaifu expressed similar opposition to a German-French proposal to supply as much as $20 billion in aid to the economically distressed Soviet Union.

According to Watanabe, Kaifu echoed Bush's concerns about aid at a time when Moscow maintains a large military complex and sends $5 billion in subsidies to Cuba each year.

The Japanese leader also raised the issue of Soviet occupation of four islands in the Kuril chain that belonged to Japan until the end of World War II. Kaifu told the New York Times in Tokyo Friday that "it would be impossible" for Japan to take part in an economic assistance program until the Soviets give back the islands.

West Germany, with the assent of France, is expected to go ahead with a Soviet aid program, despite the opposition of the United States, Japan and Britain. German Chancellor Helmut Kohl is reported to believe the assistance is the unavoidable price of gaining Soviet assent to the unification of Germany. Bush has said he would not try to stop the German assistance.

An administration official said the United States could not allow Germany to go ahead with its Soviet package and then stop Japan's aid to China. "We understand that nations can have different points of view at different times," said Treasury Secretary Nicholas F. Brady, who with other Cabinet members joined the president at the luncheon with Kaifu.

Another participant in the luncheon, Commerce Secretary Robert A. Mosbacher, said Bush was "very sympathetic" to Kaifu's position on resuming Japan's aid program.

Administration officials said Bush still believes that sanctions should remain against World Bank loans to China for anything but humanitarian purposes -- for earthquake assistance, for example, but not for development projects. They added he also suggested to Kaifu that Japan should scale down the scope of its aid program until China resumes a path toward economic liberalism and democratic reforms.

"We do have concerns about multilateral lending," said Fitzwater.

"On the other hand, there are other kinds . . . of lending that might be undertaken by individual countries, and we're willing to hear what their arguments are."

Japan, the largest source of development money for China, is conscious of being the only Asian nation at the summit, Japanese officials said. They added that Kaifu emphasized for Bush the need to ensure that China does not become economically isolated and said the resumption of the Japanese aid would be a sign of appreciation to Beijing for allowing leading dissident Fang Lizhi and his wife, Li Shuxian, to leave for London from the sanctuary of the U.S. Embassy, where they had spent more than a year.

But Chinese officials said Tokyo, as part of its new efforts to assert its political muscle in Asia, would send a senior diplomat to Beijing to tell the Chinese government that it will not resume aid if China continues to help Pol Pot's Khmer Rouge guerrillas in Cambodia.