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have been due largely to the levelling off of the economic boom in the Colony and the consequent lower increase in demand. Shortages of supply (reportedly in evidence at the Canton Fair in April 1966) may also have played a part. The third and fourth quarters showed a ufficiently large recovery to lift the total figure of Chinese exports to £173.1 million, an increase of 19% over 1965.
A part of this increase must be attributed to a change in Hong Kong regulations which have increased the coverage of trade statistics. Compared with 1965 recorded figures for 1966 may over state the growth by about 5%.7
Under normal circumstances Hong Kong's consumption requirements could be expected to continue to grow, but further Chinese successes would probably turn increasingly on the quality and diversity of their exports.
5. Entrepot trade. The figures show that Hong Kong's domestic exports to China are negligible, and that most of the items sold originate elsewhere.. Such re-exports include chemicals, base metals, textile fibres, and animal and vegetable materials. Their value, however, is steadily decreasing, as China ships more and more goods from the original supplying countries. The value of Hong Kong's re-exports of goods obtained from China is not published, but from information supplied by the political advisor's office is believed to have been about £34 million (about 20%) last year (1966). Goods thus re-exported include Chinese food specialities, textiles, animal by-products and medicines; and are sent mostly to South East Asia, Japan and Europe. It is evident that the Chinese still find it convenient to use Hong Kong and its variety of services for shipping many of their exports. Their own trading organisations, moreover, are not nearly so well equipped as Hong Kong merchants to handle a variety of small orders from overseas markets. Never- theless, as time goes on, the Chinese may be expected to improve their own facilities, and rely correspondingly less on those of Hong Kong.
6. Commercial liaison.
Hong Kong is in addition a useful trading outpost for China, especially as regards commercial dealings with countries with whom Peking does not have diplomatic relations. Preliminary negotiations for grain deals with Australia and Canada have often taken place in Hong Kong. Western firms, too, can readily make contact with Chinese commercial organisations in the Colony.
Overseas remittances
7. Most of the remittances from Overseas Chinese to the mainland are channelled through communist-controlled banks in Hong Kong. Up to 1958 they averaged about £25 million yearly, but subsequently there was a prolonged decline, largely because of unfavourable reaction among Overseas Chinese to the introduction of communes. This was accentuated by the tendency of people abroad to send food parcels instead of cash at the time when the Chinese food situation was at its worst although it temporarily increased foreign exchange receipts from parcel duties and other charges. Cash remittances in 1961 and 1962 were probably down to £15 million, but have subsequently recovered, reaching an estimated £30-35 million last year. This range is perhaps unlikely to be significantly exceeded; Indeed as a result of the cultural revolution and events in China, remittances declined in 1966 totalling an estimated £23-28 million for the year.7 Investments by Hong Kong Chinese in the Overseas Chinese Investment Companies in China probably amount to £1-2 million a year.
Other Invisible Earnings, Expenditures and Economic Advantages
8. The main Chinese invisible expenditures in Hong Kong are for services rendered by the latter in the fields of shipping, ship
/repairs,