CONFIDENTIAL
Notes on Hong Kong's Economic
Links with China
This paper examines some of the developments
in Hong Kong's economic relations with China during the past year and serves to update 'Notes on Hong Kong's Economic Links with China' prepared by Economic Services Branch in September 1979. Although it remains rather early to assess the impact on the overall patterns of trade of most of these new economic links, the trends are encouraging and confirm Hong Kong's major role in China's present drive for economic modernization and development. This is manifest not only in changes in Hong Kong's direct and entrepot trade with China, but also in China's increasing use of the territory as a model from which to learn. This has necessitated a much greater involvement in Hong Kong's economy by Chinese companies, organizations and agencies, many of which have gained such access by direct investment in the territory. The steady devolution of degrees of economic power and authority from Peking to the provinces of Guangdong and Fujian, and the continued development of Special Economic Zones, has further enhanced Hong Kong's relationship with southern China in particular.
2.
The trend towards greater economic flexibility for Guangdong and Fujian has continued throughout the year. In accordance with general guidelines first proposed as early as 1977, the two provinces have been actively promoted as special regions for the production of goods for export and areas within which direct foreign investment has been vigorously encouraged. The development of the provinces' Special Economic Zones have provided a focus for such investment. Indeed, the recently appointed Party First Secretary of Guangdong, Ren Zhongyi, in mid-November called for the development of the whole of Guangdong and Fujian as enlarged Special Economic Zones.
Although the time-scale of
such a programme is undoubtedly a long one, the impli- cations for Hong Kong are considerable.
Hong Kong's role in China's economic modernization
3.
The policies adopted by the present Chinese Government towards Hong Kong seem to be based on recognition that the territory nowadays can offer far more than a market for the sale of traditional supplies from China. Hong Kong offers the following additional benefits:
ม
(i)
source of foreign investment:
/(ii)
CONFIDENTIAL