CONFIDENTIAL
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China
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The most obvious benefit the Chinese Government derives from Hong Kong is financial and economic. And though this factor may not be conclusive, it is one to which the present leaders of China obviously give great weight in deciding to accept the status quo.
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5.
Hong Kong is China's largest export market; these exports, which in 1972 amounted to £309.1 m. (at the current rate), are largely unrequited. According to the best available estimate China obtains about 1/3rd of her foreign exchange from Hong Kong, The total receipts in 1972 are estimated at £534.6 m. Of this nearly 60% was obtained from Hong Kong's imports from China (mainly foodstuffs and raw materials but also an increasing range of unsophisticated consumer goods most of which the Chinese could not dispose of elsewhere); about 10% from overseas remittances; and nearly 1/3rd from other sources including remittances by Hong Kong residents and trading profits earned in Hong Kong by Chinese-owned firms, shops etc. China has a growing need for foreign exchange to finance her industrial and technological imports. And her inability to diversify the resources now directed to her exports of primary products which find a ready market in Hong Kong, will ensure that the importance of this source of foreign exchange from Hong Kong will continue for the foreseeable future. The recent sharp price increases in communist shops in Hong Kong demonstrate current Chinese intentions to maximise earnings in Hong Kong rather than reduce dependence on them. While the Chinese dollar is maintained as a purely domestic currency the Hong Kong dollar earnings will have a special importance.
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Politically Hong Kong provides the Chinese, as did Shanghai before 1949, with a useful window on to the capitalist world. As a focal point in regional, and international, air and sea communications Hong Kong is also a convenient place from which the Chinese can maintain contact with, and exert influence on, overseas Chinese communities in South-East Asia.
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Similar considerations apply in the commercial field. The increasingly sophisticated facilities offered by Hong Kong help to reconcile the Chinese Government's policy of excluding resident foreign commercial representatives from China with their need to maintain some sort of continuous relationship with essential Western suppliers and they make full use of them.
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CONFIDENTIAL
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