- 3
+
Western Europe and Australasia.
The entrepot trade is now
about a third the size of Hong Kong's domestically produced exports. It should be noted that, although Hong Kong exports very little to China, our imports from China of some £600 million are very considerable and, together
with other transactions from and through Hong Kong, they
account for between 30 and 40% of all China's foreign
exchange earnings. So, at the present time, Hong Kong is essential to China to earn her the foreign exchange to pay
for her import needs.
9.
As regards the British position, although Hong Kong exports to the United Kingdom some £60-70 million more than she imports, this is more than made up by Britain's earnings on shipping, aviation, insurance and other invisible and financial dealings in and through Hong Kong.
10.
Because the Hong Kong economy is so externally oriented, trading and dealing with a large number of countries throughout the world, it can only remain stable by adjusting its internal economy to its external performance. We have no central bank and the money supply is determined by the balance of payments. So the growth of the economy is dependent on the development of exports of goods and services. And the ability to export, in turn, depends on continuing investment in new plant and equipment and the optimum use of that equipment.
11.
The working of this process is illustrated by the adjustment of the Hong Kong economy to the world recession. In face of the contraction of world trade there was a flattening out of Hong Kong's exports in the first half of 1974 and an absolute decline of some 15% in the second half
of 1974 and the first half of 1975. But the internal economy adjusted rapidly to this contraction. Employment fell and unemployment increased. with the fall in the demand