t
DRAFT
SECRET
DSR 11C
UNITED KINGDOM/HONG KONG ECONOMIC RELATIONS
1. Up-to-date figures are lacking in some areas, particu-
larly invisibles. From the data available, the pros and cons
appear to be about even. The UK runs an overall current
account deficit with Hong Kong, but the amounts involved are
not substantial. UK investment in Hong Kong is relatively
small and is partly offset by return investment in the UK.
The value of Hong Kong as an entry point for the Chinese
market is at present small, but it is likely to increase.
Another growth sector is UK export credits to Hong Kong:
while not large in real terms, it is the largest single slice
of total ECGD business at risk.
VISIBLE TRADE
2.
The UK and Hong Kong are not major trading partners. Trade
with Hong Kong comprises between 1% and 2% of total UK trade.
The UK takes about 8% of Hong Kong's exports and provides some
5% of the territory's imports. The UK maintains a fairly
large deficit with Hong Kong in visible trade: in 1980 the
UK exported £559 million worth of goods to Hong Kong and
imported £850 million worth from Hong Kong, leaving a deficit of £291 million. Despite increases in British exports, the gap
has widened in the last five years.
INVISIBLES
3. UK earnings on invisibles close the trade gap to some
extent. The last available figures are for 1977 and are based
partly upon estimates. There was a private sector surplus on
invisibles that year of £156 million and a deficit on official transactions of £55 million, leaving a balance of £101 million. The UK trade deficit with Hong Kong for 1977 was £134 million,
so there was a current account deficit of £33 million. It is
probable, however, that, owing to the growth in the visible
SECRET
Dd 427265 250M 5/77 905275
/trade