DROIT
10 DOWNING STREET
LONDON SWIA 2AA
48
Gill copy
la.
THE PRIME MINISTER
Dear Gorge
Скоде
HASC ogola
RECEIVED IN RESISTẨY
23 MAY 1990
DESK C
INVE
Tat
3 May 1990
When we met last month in Bermuda, you mentioned the difficult decision you were going to have to take about Most Favoured Nation (MFN) status for China. I hope you will not mind if I underline some of our concerns about the implications of this issue for Hong Kong. I am grateful for the public recognition which you have already given to this aspect.
Non-renewal of China's MFN status would have a very serious impact on Hong Kong, at a particularly difficult and sensitive time in its history. Hong Kong's economy is now inextricably linked with that of China. They are each other's largest trading partners and Hong Kong serves as an entrepot for China's exports to the outside world. More than two thirds of Chinese exports to the United States are routed through Hong Kong.
We estimate that non-renewal of China's MFN status would deprive Hong Kong of up to US$10 billion worth of trade. The effect of this on jobs and the viability of many Hong Kong businesses, particularly those directly involved in the re- export trade, would be very significant indeed. Hong Kong's
my as a whole would be adversely affected. Investment would be hit. I know that these concerns are shared by the American Chamber of Commerce in Hong Kong and by the 900 American companies operating in the territory.