RESTRICTED
5
13.
Hong Kong is also a major source of remittances for China, but there are no statistics to indicate the magnitude involved.
14.
Part of China's invisible earnings are obtained from contracted projects or by providing labour services in overseas countries. The contribution of Hong Kong in this respect has been limited, however. Between 1976 and 1985, the total value of contracted projects and labour services. undertaken by China amounted to US$5.2 billion. Of this total, only US$0.4 billion, or 7%, were attributable to Hong Kong(3)
Conclusion
•
15.
China's gross foreign exchange earnings from exports in goods and services have generally been rising in recent years. However, during the period 1983 to 1985, its imports rose more rapidly. This resulted in visible trade deficits for the years 1984 to 1986, which the surpluses on invisible trade were too small to offset. This led to a net loss of foreign exchange reserves which was only partly offset by borrowings.
16.
From 1983 to 1986, China's exports to Hong Kong rose significantly, implying that China's gross foreign exchange earnings from Hong Kong also rose. Despite a growing tendency for China to source its imports in or through Hong Kong, China continued to run a visible trade surplus with Hong Kong, implying that Hong Kong continued to make a positive contribution to China's foreign exchange reserves at a time when its trading position with the rest of the world was in deficit.
17.
Thus, Hong Kong's relative importance to China has not been reduced, and indeed will probably increase, so long as China continues to run a visible trade deficit of significant magnitude. Hong Kong will continue to have a
(3)
Source: Almanac of China's Foreign Economic Relations and Trade 1986