It can reasonably be assumed that tourism earnings would
virtually cease and that the long-term capital inflow would
stop after incorporation into China.
15. How far would Hong Kong as part of China continue to
export and thus add to China's foreign exchange in
receipts? There would be no such exports to the U.K. (see
paragraph 12 above) and exports to the U.S.A., which does
not trade with China would no doubt cease: together
these account (1966 figures) for 53 per cent of all
Hong Kong exports, reducing potential earnings to
£165-£170 million. No doubt some part of these would be
lost because Hong Kong's other trading partners might not
be so willing to admit her goods when she became part of
China. While eventually China would seek and probably
find new markets for some part of the Hong Kong export
trade lost, it seems that the net initital effect of
incorporation of Hong Kong would be a reduction in China's
capacity to import. It is difficult to put a figure to
this but it might be of the order of £50 million.
however that any reduction in China's imports did not fall
disproportionately on the U.K., the loss of U.K. export
earnings seems unlikely to exceed £10 million. In
addition the reserves might suffer marginally because of a
Assuming
run down of Chinese sterling holdings in order to help
maintain imports.
(b) Possible effects of policy action
16.
"Natural consequences" apart and after Hong Kong
changed hands there would seem to be no strong motive either
on the U.K. or on the Chinese government to take positive
action to reduce the level of trade between the two
countries.
8
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