G.F. 326
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China is likely to lead to a deterioration in Hong Kong's visible trade balance with China as Hong Kong's imports from this source are unlikely to be affected by the recent import
restrictions imposed by China. Hong Kong's overall visible
trade balance could also be similarly affected.
39.
However, the adverse effect attributed to the
slowing down of export growth to China should not be
exaggerated. Growth experienced in 1984 and in the first half of 1985 was exceptional; even without the abrupt
restrictions imposed by China, the trend could not have been expected to go on indefinitely. The recent restrictions can
be regarded as a logical step taken by China to put its foreign trade back on to a more orderly and more sustainable
growth path.
40.
What is encouraging is that notwithstanding its
recent restrictions on imports, China appears to remain
committed to its more liberal economic and foreign trade
policies which are beginning to bear fruit after several years of implementation. Once China's foreign exchange reserve position is brought under proper control and order
restored, the harsh measures introduced in recent months will
hopefully be eased.
Summary and conclusions
41.
During the past seven years, China has twice been
troubled by the depletion of its foreign exchange reserves. The first occasion was between 1978 and 1980, during which
China incurred a visible trade deficit amounting to over US$4
billion and its foreign exchange reserves were only between.
US$1.6 and US$2.3 billion. This was largely a consequence of the launching in 1977 and 1978 of massive development
projects which entailed substantial imports of foreign technology and machinery.
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