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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 and dividends are comparatively modest about
£10 million a year.
8. Hong Kong is a member of the sterling area and keeps its
reserves in sterling. Its sterling balances are very large
of the order of £350 million. It is in our interest to ensure
that Hong Kong's reserves should be kept to a substantial
extent intact and in sterling. Special arrangements have been
made to enable the entrepot trade to continue which involve
permission for a free market in U.S. dollars. 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.
9.
Apart from the cost of maintaining military forces in the
Colony, Hong Kong is entirely self-supporting. But it could
become a major liability if a crisis of confidence led to a
large reduction of economic activity in the Colony and/or
the cessation or withdrawal of external investment. It would
seem that such a liability must inevitably arise as its
economy begins to run down towards the end of the lease in 1997.
Communications
10. Hong Kong is a valuable centre of communications.
It is
a major port, providing both ship building and repair facilities.
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