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2
per annum in real terms. Hong Kong-based financial institutions from China (notably the Bank of China) have played a significant role in financial sector growth. Not only had the number of branch offices in Hong Kong of the 13 Chinese banks increased from about 40 to over 200, but their relative share of the market had also grown. Responding to a reference by YU to the Japanese economy, the CS pointed out that a resourceless territory like Hong Kong could not insulate internal price movements from external prices. Hong Kong's economy is entirely externally orientated.
5.
In response to a number of questions, YU confessed that he had not given a great deal of thought to the significance of China's Special Economic Zones. However, he would be staying overnight in Shenzhen on his way back to Peking. He implied that since the SEZs were so small, their overall economic impact was unlikely to be great. He said it would be important to attract foreign investment and technology throughout China, and that this should not be restriced to the SEZS.
6.
At the CS's suggestion a visit was later arranged for YU to the Container handling facility operated by Sealand Orient at Kwai Chung. He returned to China via Lo Wu on 20 June.
Yas
ever
c.c. N.,Cox, Esq.,
FED, FCO.
(P. I. Webb)
Assistant Political Adviser 1
CONFIDENTIAL
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