TNAG-0568-FCO40-701-Planning-paper-on-Hong-Kong-1976 — Page 69

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5. But there are also positive advantages from the connection with Hong Kong where there are important British investments; and which acts as a centre for

British investment elsewhere in the Far East and a

centre for international communications. Hong Kong is a useful export market (0.8% of total British exports) and a source of invisible earnings which together probably (but not certainly since there is no established methodology of reckoning invisible earnings) outweigh the competition Hong Kong poses to British industry in home and overseas markets. Some of the economic advantages are of course shared

with other industrial democracies, notably Japan and the United States. But the United Kingdom also gains special advantages from the connection with Hong Kong: it is an important bargaining counter in air service negotiations;

II. The Chinese Interest

6.

Although we believe that Hong Kong is not a political issue for Chinese leaders at present, there is nevertheless an element of political embarrassment in its continued existence. Hong Kong is a reminder of China's weakness in the 19th century and remains an area claimed by China outside her administrative control. The existence of

the Colonies of Hong Kong and, to a lesser extent, Macao has been used by the Soviet Union in an attempt to

undermine China's credentials with the Third World and in waging the ideological war of words between them. Its prosperity is a

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