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export markets has resulted in a high level of domestic incomes. (wage rates being second in the region only to those in Japan), the demand for sophisticated Western, as well as regionally pro-
duced commodities is strong. Outside the region, the UK is
second only to to the USA in its exports to Hong Kong which, in 1974, amounted to some £160 million (compared with about £100 million for the first 8 months of 1975). Exports of raw
materials and semi-manufactures (where the UK is Hong Kong's fifth largest supplier) account for about 40% of the total value of UK exports to Hong Kong, whilst exports of capital goods (in which the UK is Hong Kong's third largest supplier) make up
about 30% of the total. The corresponding proportion for consu- mer goods (where the UK ties for fourth place) is about 25%.
4. A rather high proportion of Hong Kong's output is produced
under licence, with the technological input in the research,
development and design fields coming from abroad, including the
UK. Allied to this, a sizeable, though still relatively small proportion of manufacturing investment is directly representa-
tive of overseas interests. Estimates of UK direct investment
in Hong Kong range up to £150 million and in the absence of exchange controls in Hong Kong the associated interest, profits and dividends are freely transferable to the UK (as are the earnings of expatriate staff). The UK also has a direct stake in many commercial enterprises in Hong Kong, particularly in
the financial sector which has grown extremely rapidly in recent
years and which contributes as much as 20% to Hong Kong's gross domestic product. Again, there is no restriction on amounts
remitted from Hong Kong and this applies also to capital gains
made by overseas investors on the stock market. A sizeable pro- portion of the Hong Kong Government's accruals is also remitted to London, thereby providing an element of stability in the con- text of UK exchange rate and balance of payments policy.
5. The banking sector in Hong Kong is invaluable also in facilitating UK trade with China and with other countries in the region. UK trade in the region also benefits from the use by UK-owned vessels of Hong Kong's unparalleled deep sea har- bour facilities, at the confluence of major trading routes, and the adjacent container terminal, both of which help to provide highly efficient shipping turnround facilities. Hong Kong can also undertake rapid ship repair work. UK-owned shipping lines have in fact derived considerable benefits by virtue of the
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