TNAG-0741-FCO40-945-Relations-between-China-and-Hong-Kong-1978 — Page 131

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programme, there is likely to be a steady increase in

the number of orders placed in the West from 1978

onwards for advanced machinery and technology.

34. The scale of this increase will depend on Chinese

ability to increase their hard currency revenues and the

willingness of the Chinese to use the large amount of

Western credit which would be available to them. Though

China's hard currency earnings should grow steadily in

coming years, no sharp increase seems likely in the

short term. Long term trade arrangements of the type

now being negotiated between China and Japan may help to

expand bilateral trade with countries willing to

conclude them. From the point of view of financing an

expansion of Chinese imports, oil is an important hard currency earner, and the Chinese have abundant reserves

(estimated at 70 billion barrels). However, the

characteristics of the oil make it difficult to market

abroad, and importing countries, particularly Japan,

are reluctant to invest in the necessary special

refining equipment. Moreover production and logistical

problems as well as rising domestic demand in China

will, inhibit rapid growth in the surplus available for

export. The remainder of China's export growth

potential lies in the extractive industries, those based

on agriculture, and light industrial goods. Neither of

the first two is amenable to rapid increases in output,

but there are better prospects for light consumer goods,

including oil-derived products such as man-made fibres

and plastics, particularly in Asian markets. Exports

into and through Hong Kong and invisible earnings there

/are

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