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Economic
5. Our exports to Hong Kong in 1967 were £62 million f.o.b. (of the same order as our exports to Japan), a proportion of which goes on to other markets through Hong Kong. If the
Hong Kong market was lost to us, we might save what we could
sell direct in the markets hitherto supplied through Hong Kong, but clearly a lot of these frustrated exports would be
difficult to sell elsewhere at first.
6.
Our imports from Hong Kong in 1967 were £89 million c.i.f. of which £34 million was in clothing and £18 million in textiles.
If these imports were totally stopped, there would be some
substitution, particularly from other Eastern suppliers, of all types of goods; in the case of textiles, which are subject to quantitative control, such substitution could be regulated. We derive some economic advantage in being able to obtain cheap supplies from Hong Kong. Their loss might lead to a rise in prices of certain goods in the United Kingdom but there would, of course, be relief from the embarrassment (mainly political) caused by the competition of Hong Kong exports with our textile
and certain light industries.
7. Our investment in Hong Kong and our earnings from such investment is an area in which figures and facts are subject to very considerable doubt. Direct investment may be as high as £40 million and portfolio investment about the same figure, making a possible total of about £80 million. Earnings of profits and dividends are comparatively modest about
£10 million a year.
A
8. Hong Kong is a member of the sterling area and keeps its reserves in sterling. Its sterling balances are very large
of the order of £350 million. It is in our interest to ensure that Hong Kong's reserves should be kept to a substantial extent intact and in sterling. Special arrangements have been made to enable the entrepot trade to continue which involve permission for a free market in U.S. dollars. Hong Kong's
adverse balance of visible trade with the world has been
financed mainly by income from invisibles including tourism, shipping, banking and commercial services and through the flow cf capital funds from abroad.
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