banking system providing a bridge part of the External Account Area,
UK
control exchange between China and the outside world.
made it Much of China's trade is financed obligatory on all UK investors in HK through banks in the Colony and until shares to use investment currency. recently, was conducted in sterling, Now all former Sterling Area shares thus giving business to London. and stocks must be acquired through China's purchase of sterling in Hong the investment currency pool and Kong contribute to sustaining the currency in this pool is currently at foreign exchange value of sterling. about 25 per cent premium over the The foreign exchange carnings of
spot rate. China in Hong Kong have always been significant. Until about 1970, over 60 per cent of China's foreign reserves was generated in Hong Kong. Its earnings in Hong Kong now constitute about 45 per cent of its total foreign exchange earnings and, even at a conservative estimate, run at a level of over £30 million a month.
Remittances
It would also seem that Hong Kong is of considerable advantage to UK's large institutional investors. The freedom to remit dividends and profits from Hong Kong was fully utilised by UK investors at the height of the stock market boom during the first quarter of this year. It is estimated that between £250 and £350 million was remitted across the ex- changes to UK. Much of this was the realisation of carlier long-term investments, some represented a once- for-all profit for UK and together, they accounted for a large part of the reduction in Hong Kong's sterling balances. It is hoped that investors who reaped good profits here will eventually be tempted to return.
Since July 1972, when the Sterling Area was dismantled and HK became
Although this could have adverse effects on the future growth of financial activities here, Hong Kong does enjoy one advantage over the former non-sterling areas. This is due to the fact that 100 per cent of the proceeds of shares of companies incorporated in the former Sterling Area can be disposed of in the investment currency market whereas only 75 per cent of the proceeds of shares on non-sterling area countries may be sold as investment currency.
and
An important recent development has been the increasing use by City of London institutions and banks of international repute, of Hong Kong as a financial centre. These banks, money brokers, sharebrokers export finance confirming houses add to the range of financial services Such in- available in Hong Kong. stitutions while tapping Hong Kong funds for their operations have also access to funds around the world which are made available in Hong Kong and throughout the Far East. Hong Kong has in a sense become an offspring of the City.
an
Hong Kong has also been important market for UK insurance
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