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D.
CHINESE INTERESTS
28. Hong Kong provides China with a window on the outside world,
It has and with an easy point of access for trade and travel. served as a centre from which to mount subversive activities against the free world, particularly in the field of subversive propaganda.
Foreign Exchange Earnings 29. China earns a large surplus on visible trade with the Colony (£170 millions in 1966). The bulk of China's exports to Hong Kong are foodstuffs (40%-50%); there is also a considerable market for Chinese textiles, simple machinery and other manufactured goods. From this trade surplus, from remittances by Overseas Chinese in or through Hong Kong (estimated at £30-235 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 earnings of foreign exchange).
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.
Their rapid
Earnings in 1960-62 averaged some 280 million. rate of increase by 1966 is unlikely to be maintained and from now on Hong Kong's relative importance as a source of foreign exchange may even gradually decline. However, it is likely to 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;
as time
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