TNAG-1036-FCO40-1286-Future-of-Hong-Kong-1981 — Page 163

UK CONFIDENTIAL

Total Value of Hong Kong to China.

7. Some of China's earnings from the interests described above are doubtless

retained by the communist banks in Hong Kong for future investment. However, a

large and growing proportion is converted into other foreign currencies and placed

at the disposal of the Bank of China in Beijing. Foreign exchange earnings derived

by China from Hong Kong, including remittances through the colony from Overseas

Chinese, account for

we would expect Hong Kong to remain an important and growing source of foreign

exchange. Hong Kong is important as a source of investment, trade and business

expertise for the SEZ's and through them for China's current modernisation plans

and we would expect it to become increasingly active in economic developments in

Guangdong Province. Hong Kong will continue to rely on China for a growing

proportion of its foodstuffs, water and petroleum supplies. Although commentators

have speculated at what point business confidence in Hong Kong might be weakened

by uncertainty about the future, we believe that the Chinese are unlikely to initiate

any action which would damage this growing and profitable economic relationship.

a third of China's total foreign exchange earnings and

31. Oct. 1980

UK CONFIDENTIAL