TNAG-0938-FCO40-1157-Visit-of-John-Nott--Secretary-of-State-for-Trade--to-Hong-Ko-1980 — Page 77

BRIEF 10

OUTLOOK

11

With the termination of the 99-year lease in mind, under which the New Territories were leased to Britain in 1898, the Chinese Premier, Hua Guofeng, and the Vice-Premier Deng Xiaoping, have both recently made a special point of publicly reassuring investors about the future of their investments in Hong Kong. The Chinese Government made it clear that, because of the important role that they believe Hong Kong can play in their modernisation programme, they have an interest in maintaining the prosperity and stability of the territory. As a result, confidence in Hong Kong remains high.

12

The advice that the Department of Trade has in the past tendered that those wishing to export to China should deal directly with the Chinese and not employ middle-men, still holds, in the main; there will often be no substitute to going to Peking, the centr for all policy decisions. However, it is clear that for some UK producers, particularly those who are seeking involvement in the southern provinces, there may well be benefits in trying to involve Hong Kongers in a triangular arrangement or using Hong Kong as a base for entry into the China market. (For example, UK companies could set up local offices, branches or subsidiaries in Hong Kong or appoint Hong Kongers as agents, spotting opportunities in the souther: provinces).

13

A note of warning should, however, be sounded. British firms tackling the China market for the first time should seek advice on th real opportunities which exist. China remains very short of foreign exchange; China's overall imports in 1979, despite very substantial growth, only just drew level with Hong Kong's overall imports of approximately £8,000m. Moreover, commercial discussions with the Chinese are almost invariably protracted and time-consuming, requirin considerable financial and manpower resources with no guarantee of success. Exporting into China requires a major commitment: in a rece despatch from Peking, HM Ambassador warned, "Those whose approach is only half-hearted would be best advised to look to easier markets

nearer home."