TNAG-0525-FCO40-620-Visit-of-UK-Members-of-Parliament-(Defence-and-External-Affa-1975 — Page 102

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AND RECOGNISING ALSO THAT

and recognising also that many of the trading and related opportunities offered by Hong Kong are potentially available not only to the UK but to a great many other countries as well.

3. First, on its purely visible trade, the UK runs a deficit with Hong Kong. This has been mounting in recent years.

UK-imports

UK imports

UK exports

UK deficit

£ million

1964

1969

1974

81

126

292

58

89

158

23

37

134

Hong Kongtends to specialise in the production of these commo- Hong Kongtends dities in which it has a comparative cost advantage over its overseas competitors (including the UK). About half its manu-

facturing output is made up of textiles and clothing which re- present about 30% of the value of UK imports of textiles and

clothing from all sources. But whilst the UK recognises the

importance of international specialisation and trade, it is

also conscious of the short-term disruptive effects which large

quantities of relatively cheap imports can have for the domes-

To an extent, imports from Hong Kong can undoub-

tedly be a mixed blessing. On the other side of the account,

the Hong Kong market accounts for about 1% only of the value of total UK exports (though it is relevant that Hong Kong firms can usually be relied upon to settle their obligations).

tic economy.

4. Turning next to invisible transactions, it is estimated

that only about 1% (say £15-20 million) of the UK's receipts from

interest, profits and dividends arises from direct investment

in Hong Kong. UK investment in Hong Kong manufacturing indus-

try is probably about £150 million at the very outside. This

is very much smaller than that for the United States. Of the

overseas companies established and registered in Hong Kong at the end of 1974, 115 were from the UK, compared with 226 from

the United States and 98 from Japan. These figures do not,

however, include locally incorporated subsidiaries which may

be preferred to branches for tax reasons.

5.

to

مل

In addition, this direct income, however, the UK/benefits

indirectly from Hong Kong through profits from the operations imag UK-owned shipping and air lines. In the case of ship-

ping, in particular, however, Hong Kong itself is a strong UK

competitor. Although British shipyards may benefit from orders

from Hong Kong shipowners, this can also be said of yards in

/other

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