CUNE IDEN
DSK TIC
DRAFT MEMORANDUM (CONTINUATION)
d) HONG KONG/CHINA TRADE; CHINESE INVESTMENT IN HONG KONG
1.
During the recent visit to China by the Governor of Hong Kong, Chinese leaders were particularly frank in their explanation of the economic importance which they attach to Hong Kong and the role which the territory can be expected to play in China's current modernisation programme. The Chinese leaders clearly reiterated their desire for increased trade, tourism and investment in Hong Kong and Vice-Premier Deng Xiaoping formally requested the Governor to tell investors to "put their hearts at ease" regarding Chinese intentions in Hong Kong.
2. Comments such as Deng's demonstrate a recognition of the advantages in Chinese investment in a prosperous and advanced economy in Hong Kong. The economic relationship between China and Hong Kong has a long history. Among the well-established links are those through which China provides a large proportio of Hong Kong's food, raw materials and other essential supplies. Increasingly though, Chinese interest in the economy of Hong Kong has grown more sophisticated, and there is clearly emerging a network of newer economic relationships which enhance Hong Kong's role as a major Chinese entrepot.
3. History of the economic relationship. In the nineteenth century Hong Kong developed as a model free-port well placed to enjoy the heyday of Victorian laissez-faire commerce. The Colony served as a centre for the expanding British trade with China, and supplied the conditions under which commerce could prosper. The 1914-18 war marked the end of an era for the economy of Hong Kong and in the years following the Versailles Treaties the Colony was forced to adapt to a considerably changed world. A new international economic order was emerging in which nationalistic and protectionist economies placed restrictions on over-all international trade. Hong Kong remained a free-port, the basis for its prosperity, with increasing difficulty.
4.
Mainstay
China had been the staple of Hong Kong's commerce before the War, but the nationalism of the new Republican regime coupled with social, political and economic disorder within
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