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17. That the PRC have so far refrained from taking over
Hong Kong, despite their material strength and nationalist
principles, is largely because of the economic benefits they
derive from the territory. They obtain 35% to 40% of
their foreign exchange from Hong Kong, largely from their
exports to Hong Kong and the activities and investments
of PRC banks and trading organisations there. They also
derive substantial economic advantage from investments by
Hong Kong businessmen in China, from the managerial,
financial and technological expertise and example readily
available in the territory, and from the port and airport.
For these reasons they clearly want Hong Kong to be
maintained as a prosperous, stable economic entity serving
Chinese purposes. They accept that it should remain
capitalist in character but it is not clear how far they
can admit that the confidence of investors and entrepreneurs,
which is the essential determinant of prosperity and stability,
depends on continued British administration.
Time Factor
18.
Confidence in and outside Hong Kong is already
beginning to be affected. There is a degree of nervousness
reflected in the Hong Kong Stock Market which is partly due
to uncertainty over the future. Without an announcement of
positive progress in the near future, local and international
investment (most is generated internally) will almost
certainly cease and move elsewhere. No-one can forecast
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