the
of the loss of Hong Kong whether adverse (perhaps more
likely) or positive, would be small if not negligible.
The same is probably true of income effects, even
taking account of some increase in prices arising from
the loss of supplies of low cost Hong Kong manufactures.
10.
This broad judgement that the economic effects would
not be great does not need qualification, when account
is taken of Hong Kong's sterling balances.
It is
assumed that these would be blocked at the outset and
that any releases would be made (under criteria to be
determined) only to non-residents of Hong Kong. In the
short run and assuming that the blocking in itself caused
no shock to confidence, this should in itself tend to
strengthen sterling rather than otherwise if only because
any threat that the Chinese would get the use of the
balances would have been removed. To the extent that
releases were made from the balances transfers of earnings
on them would be resumed, but the presumption is that
most releases would be to residents of the U.K. or of the
0.3.A.
II.
Effects arising from the "Enlargement" of Chinu
11. In this section, an attempt is made to assess firstly
how far there would be "natural" changes in the level of
our trade with China, if it were enlarged to include
Hong Kong and secondly how far policy decisions arising from the loss of Hong Kong (and whether by U.K. or China)
might tend to invalidate the assumptions in paragraph 3
above or otherwise to have effects on the U.K. economy.
(a) "Natural consequences" for Anglo-Chinese trade
12.
Assuming that the present U.K. import regime for goods
of Chinese origin (such imports totalled £33.8 million in
6
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