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K. B. Bucknall 109
between China and Hong Kong is internalized and foreign ex- change ceases to flow, but China acquires the balance of payments position of Hong Kong with the rest of the world, while re-exports to and from China via Hong Kong continue.' In 1980 the visible balance of Hong Kong with the world other than China was a surplus of U.S.$462,000,000. Invisibles are harder to estimate, but if we adopt the method of Breazer of taking the change in bank deposits, deducting the increase in loans and advances in Hong Kong and adding any increase in notes and coins in the hands of the public as providing a rough estimate of the total invisible flow, we can subtract the invisible deficit to China to gain an idea of the balance with the rest of the world. The "after" case reveals a gain to China of U.S.$1,915,000,000. In order to obtain the estimate of the net loss to China of taking Hong Kong we subtract the "after" from the "before" to reach a figure of U.S.$3,684,000,- 000 (see Table 1).
This estimated loss to China of taking Hong Kong of U.S.$3,684,- 000,000 is substantial, representing some 18.9 per cent of China's gross export earnings of 1980 (U.S.$19,492,500,000), 49.9 per cent of China's gold and foreign exchange reserves (U.S.$7,382,000,- 000) and 21 times the trade balance of China with the world (U.S.$176,800,000). The latter figure includes the U.S.$3,156,- 000,000 surplus carned from Hong Kong, without which China would have been heavily in deficit.
Table 1. An Estimate of the Value of Hong Kong to China. From Foreign Trade in 1980, in U.S.$ millions:
I "Before"
1.
China's exports to H.K.
2. China's imports from H.K.
4,411
1,255
3.
China's visible trade balance with H.K.
3,156
The Invisibles:
4.
Earnings of Chinese firms in H.K.
600
5.
Profits from joint ventures
1,200
6.
Remittances
600
7.
Visitors and tourists
43
8.
All invisible items (4+5+6+7)
2,443
5,599
II "After"
9. China's overall trade balance with H.K. (3+8)
10. H.K. visible trade balance with the world, excluding China 11. H.K.'s invisible balance with the world
12. H.K.'s invisible balance with the world, excluding
462
- 1,744