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(16) region
Thus, in the short to medium term, this development is likely to be mutually beneficial. However, over the longer term, Hong Kong manufacturers may have. less incentive to upgrade their products and production processes, and this could impair Hong Kong's export capability and industrial development in the future.
43.
Notwithstanding increased inflation in China,
the prices of Hong Kong's imports from China have remained generally stable, largely due to the cumulative depreciation of the Renminbi over the past two years.
China's efforts in maintaining the external
competitiveness of its products is another contributory factor. In the past few months, following a substantial depreciation of the Renminbi in the black market, parallel trading in textile products and in Chinese medicines has apparently revived. The amount of parallel trading so far is, however, much smaller than previously. From China's point of view, such trading will have an adverse effect on its export earnings. But from Hong Kong's point of view, a larger supply of Chinese goods through parallel trading will have some dampening effect on local price increases, over and above that provided by the Chinese goods imported
through formal channels. According to the China Goods. Consumer Price Index compiled by the Census and Statistics Department, the retail prices of consumer goods imported
from China rose by an average of only 1.5% between January
and June 1987.
(16) For the Guangdong province as a whole, it has been
reported that some 9000 enterprises with up to a million workers are engaged in processing/assembling activities commissioned by Hong Kong manufacturers. Sub-contracting fees earned in 1986 are reported to have amounted to US$270 million.
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