TNAG-0281-FCO40-317-Visit-of-the-Chancellor-of-the-Duchy-of-Lancaster-to-Hong-Ko-1970 — Page 79

CONROENTIAL

IN PRENADM

exports increased by 30 per cent and in 1969 by 25 per cent over the previous

year to reach a total of £907 millions. Whereas in 1947 80 per cent of total

exports from Hong Kong were re-exports by 1969 the situation had been reversed;

exports of manufactures were 80 per cent of the total, re-exports 20 per cent.

85-90 per cent of Hong Kong's production is exported (half of this is textiles,

although electronics, toy, plastics and wig industries are growing rapidly).

And Hong Kong has now become the twenty third biggest world exporter. This

industrial expansion is, however, rather narrowly based because of the lack of

indigenous materials or of the research and development effort needed to sustain

advanced technology. It tends to be concentrated on consumer goods or light

components. The population has nearly doubled over the last twenty years to

4 million. The estimated figure of £275 per capita GNP is towards the upper

end of the developing countries, roughly comparable to that of Spain or Greece

and about three times as high as Taiwan and South Korea. (More detailed

economic statistics are contained in the Annex).

PROBLEMS

4.

The

But over this low taxation, nil tariff, freebooting free enterprise economy,

of which Adam Smith would have been proud, hang the shadows of three problems.

In 1997 the lease of the New Territories (an area of over three hundred square

miles mainly beyond Kowloon - the mainland peninsula facing Hong Kong island)

expires. If it had then to be surrendered to China most of Hong Kong's

manufacturing industry and its airport would be lost and Hong Kong as it is

today would cease to be viable. But in the view of the Hong Kong Government

the problem is unreal in this form. Communist China has never recognised what

it calls "the unequal treaties"; Hong Kong exists under British rule because

China finds it convenient (over half China's foreign exchange earnings come

via Hong Kong);` Hong Kong will continue to exist as long (but only as long) as

"China finds it convenient and the date of 1997 (though it will give rise to

considerable uncertainty in the Colony and elsewhere as it approaches) may not

in fact have the conclusive significance for the Colony's future which is

sometimes assumed.

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CONFIDENTIAL