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6.
Our imports from Hong Kong in 1967 were £89 million c.i.f., of which £34 million was in clothing and £18 million in textiles. If these imports were totally stopped, there would be some substitution, particularly from other Eastern suppliers, of all types of goods; in the case of textiles, which are subject to quantitative control, such substitution could be regulated. We derive some economic advantage in being able to obtain cheap supplies from Hong Kong. Their loss might lead to a rise in prices of certain goods in the United Kingdom but there would, of course, be relief from the embarrassment (mainly political) caused by the competition of Hong Kong exports with our textile and certain light industries.
7. Our investment in Hong Kong and our earnings from such investment is an area in which figures and facts are subject to very considerable doubt. Direct investment may be as high as
£40 million and portfolio investment about the same figure, making a possible total of about £80 million.
Earnings of profits
about £10 million a year.
and dividends are comparatively modest 8. Hong Kong is a member of the sterling area and keeps its reserves in sterling. Its sterling balances are very large
It is in our interest to ensure of the order of £350 million. that Hong Kong's reserves should be kept to a substantial extent intact and in sterling. In practive the Colony has been granted wide dispensations from the ordinary rules of membership. Special arrangements have been made to enable the entrepot trade to continue which involve permission for a free market in U.S. dollars. No precise balance of payments figures are available for the Colony but it seems unlikely that, over the years, it has run any pronounced overall balance of payments deficit. Hong Kong's adverse balance of visible trade with the world has been financed mainly by income from invisibles including tourism, shipping, banking and commercial services and through the flow of capital funds from abroad (mainly from overseas Chinese e.g. in the U.S.A.
9. Apart from the cost of maintaining military forces in the
But it could Colony, Hong Kong is entirely self-supporting. become a major liability if a crisis of confidence led to a large reduction of economic activity in the Colony and/or
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the cessation
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