CONFIDENTIAL # 2
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21.
Insofar as China's visible trade balance is
concerned, the contribution of Hong Kong is clearly important, if not vital. With the exception of a
brief period of three years 1962 to 1964, China's visible trade balance would have been persistently in
deficit from 1952 to 1981 (30 years) had it not been
for the trade surpluses with Hong Kong, and the
overall deficits which did occur would have been much
larger. So, broadly speaking, China has been able to pursue a policy of using its trade surpluses with
Hong Kong to finance its deficits with other
countries. That this has been possible is not
surprising given that Hong Kong has long been China's
largest export market (probably since 1964) with its
share accounting for about one fifth of China's total
exports in the second half of the 1960s; this share
increased further to nearly one quarter in the late
1970s and early 1980s.
22.
(c) China's foreign exchange earnings
position
Although China has not so far published any official statistics on foreign exchange earnings, a
recent study by Yamada (1981) included some figures
for 1977-80 which were said to be derived from the
Bank of China's submission to the International
Monetary Fund. While these statistics are very
tentative and sketchy, they can provide some basis
for ascertaining Hong Kong's importance in China's overall financial position. The constraints imposed by the availability of data result in only four
years, 1977-80, being included in the following table.
G.F. 326
CONFIDENTIAL # 3