TNAG-1036-FCO40-1286-Future-of-Hong-Kong-1981 — Page 152

CONFIDENTIAL

Reference

HONG KONG: ECONOMIC IMPORTANCE TO THE UK

Current Account

1.

For the period 1975-77 the UK has run an overall deficit on current in its trade with Hong Kong. This comprises a large visible trade deficit in all the years shown, and a fluctuating surplus on invisibles in those years for which data are available (see Table 1).

2. The trade figures are those shown in Tables 2 and 3, although UK imports have been reduced by 13% to reflect the cost of the cif element and port dues. The trade figures in Table 1 are therefore on a Balance of Payments basis. The invisibles, which as indicated below are subject to a number of uncertainties, are those presented in Table 4. The main reasons for the increase in the overall deficit in 1976 was a relatively strong growth in imports from Hong Kong, combined with a fall in private transfers and in interest, profits and dividends (ipd) from Hong Kong. These factors were reversed in 1977 resulting in a lower trade deficit and a larger surplus on invisibles, in turn leading to the fall in the deficit on current account to £32 million. No data on invisibles are available for later years, but it is probable that the UK sustained an overall deficit on current account in 1979 and 1980 owing to the growth of the visible grade gaps, after this had fallen in 1978.

Table 1: UK Hong Kong Current Account (£ million)

1975

1976

1972

1978

1979 1980 (10 months)

Exports

160

204

272

362 442

448

Imports

267

387

406

462

(601

(626: 7.91?

859.3

Visible trade

balance

-107 -183

-134

-100

-159

-178

7 4

Invisible surplus

Current Account

36

-71 -136

47

102 ol n/a

n/a

n/a

-32

n/a n/a

n/a

33

718?

CODE 18-77

Visible Trade

3. Exports to Hong Kong in 1979 amounted to £442 million (£448 in the first 10 months of 1980), representing some 1% of total UK exports (see Table 2). Exports have increased steadily in recent years and between 1974-9 their value grew at an annual average of 5.7%. This rate of growth was higher than average and accounts for the increase in the market share in the period shown. Some 90% of UK exports were of manufactured goods (SITC nos. 5-8), the main items being machinery equipment and power generating equipment.

4.

In 1979 imports from Hong Kong amounted to £691 million (£791 million), representing 1.6% of total UK imports (see Table 3). Imports are still dominated by clothing, which accounted for 38% of the total, but their share has steadily fallen and other goods especially electrical and telecommunications products have grown

NETDENIUTAT

/and