CONFIDENTIAL
TELELETTER
hackles in the protectionist lobby and made it difficult for
those in the Administration who want some pragmatic deal for
China, (eg Yr Telno 371). We see a risk that US hostility to
China's soaring trade surplus may yet be turned on Hong Kong.
This could weaken our power to influence the US Administration on
Hong Kong's behalf.
3. We note (from the US/China trade figures, 1987 to 1992) that
while China's surplus with the US rose to record levels, Hong
Kong's and Taiwan's surpluses correspondingly fell, mainly
because Hong Kong and Taiwanese companies relocated production to
China's coastal provinces. To put it another way, Hong Kong and
Taiwan have been exporting their trade surpluses with the US, via
outward-processing, to the Chinese. It could be that US wrath at
a rising deficit with "Red" China would be soothed by the
knowledge that net trade with "Greater" China is the same overall
as five years ago, but I doubt it. I suspect that Americans
attach an emotive significance to a deficit with a communist
country which will be hard to deflect.
4.
The next step might be for the protectionist lobby to look
for scapegoats. We note that President Clinton himself, (during
his telephone conversation with the Prime Minister on 10
February), pointedly mentioned that a lot of China's exports were
financed by Japanese money. The finger could equally point at
Hong Kong. Our bullish statistics (eg 70 per cent of foreign
capital in South China comes from Hong Kong, 3 million
manufacturing workers in South China employed by HK firms),
Look less rosy from the US protectionist end of the telescope.
may
5. The potentially damaging effects on Hong Kong of non-renewal
has always been a strong argument to help persuade the US to
renew MFN. The Governor has argued (with good reason), that he
will wield more influence as a Lobbyist in Washington on MFN if
Hong