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COLONIAL
OFFICE
C.
WHAT ADVANTAGES DOES CHINA DERIVE FROM HONG KONG?
1.
Contacts with the Outside World, Hong Kong providos China with a window on the outside world, and with an oasy point of access for trade and travel. It has served as a contro from which to mount subversivo activitios against the free world, particularly in the field of subversive propaganda.
2.
Foreign Exchange Earnings. China carns a large surplus on visible trade with the Colony (£170 millions in 1966). The bulk of China's exports to Hong Kong arc foodstuffs (40%-50%); thero is also a considorable markot for Chinose textiles, simple machinery and other manufactured goods. From this trede surplus, from romittances by Overseas Chinese in or through Hong Kong (estimated at £30 - £35 million in 1966) and from the operations of Chinese financial and commercial enterprises in Hong Kong, total foreign exchange earnings estimated at £200-210 million accrued in 1966 (over a third of China's total carnings of foreign exchango).
3.
C
These earnings, which are regularly converted into storling, havo played a major role in financing China's trade deficits with other areas of tho froo world with the industrial countries of Western Europe in 1959-60 and again in 1955-66 and with Canada, Australia and other major grain oxporters to China.
4. Darings in 1960-62 avoragod some £80 million. Their rapid rate of increase by 1966 is unlikely to be maintained and from now on Hong Kong's relative importance as a source of foreign exchango may ovon gradually decline. However, it could romain the largest single source of carnings for some years to come.
5. China's Use of Hong Kong's Trado Facilities. Hong Kong's domestic exports to China are negligible. There is a modest ro-export trade in chemicals, baso metals, toxtilo fibros, ctc.; this is, howover, steadily decreasing as China ships more and more goods from the original supplying countrics.
6. The value of Hong Kong's re-cxports of goods obtained from China is believed to be about £34 million (about 20%) in 1966. These include Chinese food specialitics, textilas, animal by-products and medicinos and arc sont mostly to South East Asia, Japan and Europo. It is ovidont that China still finds it convenient to usc Hong Kong and its variety of services. China's own trading organisations are not nearly so well equipped as Hong Kong merchants to handle a variety of small orders from overseas markets; as time goos on, howover, they may be expected to improve their om facilitios and rely loss on those of Hong Kong.
/7. Hong Kong
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