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international airport at Kai Tak is a valuable point on trunk and rogional air routes and the Colony provides the only aircraft repair facilitics for thousands of miles. Air traffic rights at Hong Kong have been of increasing importance to the United Kingdom in the nogotiation of Air Services AgrCO- monts with other countrios; the monopoly of cabotage rights at Hong Kong enjoyed by B.0.A.C. has been of great value to that Corporation. Tho SEACOM telecommunication cable link between Singapore and Australia passos
through Hong Kong.
12. Economic. Our cxports to Hong Kong in 1966 woro £65 million f.o.b. (greater than our exports to Japan). Prospects have been good and indeed the lovel has risen from £41 million in 1960. Exports cover a wide range, including a good deal of machinery and transport equipment and other metal goods. A proportion goos on to other markets through Hong Kong, but vory littlo now goes on to China. If the Hong Kong market was lost to us, wo might savo what we could sell direct in the markets hitherto supplied through Hong Kong. Clearly a lot of those frustrated exports would be difficult to
sell alsowhore at first.
The
13. Our imports from Hong Kong in 1966 wore £81 million c.i.f., of which £30 million was in clothing and £18 million in textilos. If these imports wore totally stopped, thore would bo sono substitution, particularly from other Eastern suppliers, of all types of goods except toxtilos. The exclusion of those cheap supplies might lead to a rise in prices of certain goods in the United Kingdom. We would, of course, be relieved of the embarrassmont
Saffaticat) caused to the textile and certain light industries here by the preferential
entry and compotition of Hong Kong cxports to this market; and in our relations with other countries where Hong Kong exports have caused some
disruption.
14. Our investment in Hong Kong and our carnings from such investment is an arca in which figuros and facts are subject to very considerable doubt.
Direct investmont may be as high as £40 million and portfolio investment about the samo figuro, making a possible total of about £80 million. Earnings of profits and dividends are comparatively modest about £10 million a year.
We pay out more in interest on sterling balancos. Hong Kong's sterling balances are of the order of £330 million (privato holdings £130 million, official holdings ovor £200 million). A substantial proportion of those balances roprosents the storling backing in the currency fund (£194 million).
15. Hong Kong is a mombor of the sterling arca and koops its reserves in storling; but in practice the Colony has been granted wide dispensations from
the ordinary rulos of momborship. Spodial arrangements have boon made to
enable the ontropot trade to continuo which involve permission for a froc
markot in U.S. dollars.
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/16. Hong Kong's
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