SECRET
12. The effect on direct inward investment of (a) and (b) is, again, uncertain. On the one hand, the 482 establishments mentioned are clearly fairly small on average and it could be that the Chinese would be content to leave them alone, as bringing something useful to the HK economy. On the other, the policy of attracting foreign investment to China has not so far
though these are early days been a great success and little has been from other than overseas Chinese sources. In general movements of direct investment are naturally sensitive to political and constitutional as well as economic factors. Option (b) would, therefore, appear on the face of it less likely than (a) to bring a halt; complete or substantial, to the process of rising inward investment into HK.
13.
Invisibles Trade
There are few data available, though it is generally considered that the UK makes a surplus on this with HK. For what it is worth, a private study produced for a number of HK interests in London, and with the encouragement of the HK government, estimated that in 1975 the UK earned a surplus of £119mns on private invisible transactions (the UK visible deficit with HK for the same year was £115mns against £291mns in 1980). The estimates covered sea transport, civil aviation,, travel, other services and profits, interest and dividends: it is not apparent to what extent the estimates covered capital movements. How these figures would appear if updated can only be guessed at. Some at least of the credits would presumably have continued to rise. As for HK generally, the government statistics show a big surplus on invisibles of SHK 8730mns for 1981, imports and exports of trans- portation services being apparently the largest items (no breakdown of the invisibles imports and exports is given by the HK government). With such limited data comment on the effects of options (a) and (b) is. even more of a guess than for other issues. (a) again looks likely to have the most adverse effect: tourism is an example, given the substantial amount HK earns on this account and the limited success which the Chinese are having so far in attracting tourists to the PRC with its shortage of hotels and other facilities.
OT4/2 Division
Department of Trade
11 August 1982
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