TNAG-0584-FCO40-717-Trade-relations-between-UK-and-Hong-Kong-(other-than-EEC)-1976 — Page 24

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I

3.

The depreciation of sterling will help, but there is no sign

that it has had an appreciable impact so far. On past performance it

is about a year before it leads to an improvement in exports and the CBI is predicting a sharp increase in the volume of exports in 1977. In statistical terms the effect so far has been to lead to a growing gap between the sterling export figures, which are up some 35% on 1975, and the Hong Kong import figures, which have remained more or

less static.

This suggests that

there has been little or no increase in the volume of British exports

to Hong Kong as a result of depreciation. No common pattern is discernible either as between similar products or different products other than that the majority of agents and distributors seem to have

been able to iron out production cost increases and to keep selling costs relatively steady. But both suppliers and agents react differently

and a number of varients are apparant:

Some firms

(i) With the squeeze on domestic demand and tight price control in Britain, exporting has become more profitable. are seeking to maximise their sterling earnings by quoting in currencies other than sterling and keeping their prices up if their overseas markets will stand it. While this will not' lead to an increase in the volume of exports through lower price (and the lower the price,

the faster you have to run to stand still), the fact that exporting is more profitable than selling on the home market, drives new companies into exporting and makes established exporters concentrate

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