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On those assumptions (and assuming that the increased
production under (b) had an import content of 25 per
cent), the net effect on the visible account would be
positive at say £27 million. (Income would have
increased because of increased U.. production, though
in real terms this would be partially offset because
domestic production and imports from third countries
could be assumed to be more expensive than the Hong Kong
imports displaced.) Taking account of the assumed
85 million loss on invisible account above we get a
balance of payments improvement of say £20 to 625 million.
10.
The above analysis yield a range (annual rate) for
the balance of payments effecte from minus 055 million
to plus £20-25 million.
Some part at least of the UK.
resources used for exports to Hong Kong would be
expected eventually to be re-deployed into uses beneficial
to the balance of payments and increased U.I. production
should meet some of the demand hitherto met by imports
from Hong Kong. It is difficult to assess the extent to
which this would happen or what time lag would be necded
for the necessary adjustments, but there are some grounds for relative optimism:-
(1) about 18 per cent of Hong Kong's imports (1966)
are re-exported and assuming that imports from
the U.K. are re-exported in roughly this
proportion, this gives £10-12 million of U.K.
exports which it should be relatively easy to
re-direct to their ultimate destinations;
Hong Kong is a special case in that over 60 per
cent of her exports to the UK, are of "low
cost" textiles and clothing, and imports into
the U.K. of similar "low cost" textiles from
(11)
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