TOP SECRET
Hong Kong, total foreign exchange earnings estimated at £200-210 million accrued in 1966 (over a third of China's total earnings of foreign exchange).
A
30. These earnings, which are regularly converted into sterling, have played a major role in financing China's trade deficits with
other areas of the free world with the industrial countries of Western Europe in 1959-60 and again in 1965-66 and with Canada, Australia and other major grain exporters to China.
31. Earnings in 1960-62 averaged 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
a source of foreign exchange may even gradually decline. However, it could remain the largest single source of earnings for some years to come.
China's Use of Hong Kong's Trade Facilities
32.
There
Hong Kong's domestic exports to China are negligible. is a modest re-export trade in chemicals, base metals, textile
fibres, etc.; this is, however, steadily decreasing as China ships more and more goods direct from the source of origin. The value of Hong Kong's re-exports of goods obtained from China is believed to be about £34 million in 1966 (about 20% of all imports from China). These include Chinese food specialities, textiles, animal by-products and medicines and are sent mostly to South East Asia, Japan and Europe. It is evident that China still finds it convenient to use 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; goes on, however, they may be expected to improve their own facilities and rely less on those of Hong Kong.
as time
33. Hong Kong is in addition a useful trading outpost for China, especially as regards commercial dealings with countries with whom
it does not have diplomatic relations. Preliminary negotiations for grain deals with Australia and Canada have often taken place in Hong Kong. Western firms, too, can readily make contact with Chinese commercial organisations in the Colony.
Hong Kong as hostage for our good behaviour
34. China could at any time bring pressure to bear on the Colony with a view to influencing our policies or actions elsewhere than in the Colony. This might be used in the promotion of China's interests and to the detriment of our interests.
TOP SECRET
/ Significance of
No comments yet.
Private notes are available after approval.