G.F. 326
NTIDENITAL 11⁄2 u
29
(b)
Possibilities for recouping losses
elsewhere
33.
An important factor determining whether
China could recoup these foreign exchange losses
elsewhere is the feasibility of diverting the goods
concerned to other overseas markets. Part of China's
merchandise exports to Hong Kong could be diverted to
other countries. Quite a substantial proportion
(slightly more than 40%) of Hong Kong's imports from
China is already re-exported to other overseas
markets. However such entrepot trade is at present
normally routed through a Hong Kong merchant acting
as an intermediary: the goods are first bought by the
merchant before they are re-sold (re-exported) to a
third country. It is doubtful whether all of this
entrepot trade can continue smoothly if there is any
significant change in the present status of Hong
Kong. Some seems likely to be lost. Nevertheless, a
significant proportion of the existing entrepot trade
would probably continue.
34.
For the remaining portion (slightly less
than 60% of the total) of China's merchandise exports
to Hong Kong which is consumed locally, the picture
is more gloomy. Some of these goods would still be
"exported" to Hong Kong, but convertible currency
would not be obtained directly in return. As for the remainder, many would not have ready alternative
markets. First, more than one quarter of Hong Kong's
retained imports from China consists of livestock,
fresh food items like vegetables and fish, and water
for which no alternative equivalent market exists.
Secondly, for cheap and bulky items, it is often not
economical to transport them over a long distance.
Thirdly, many Chinese products enjoy large market
shares in Hong Kong because they enjoy a price
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