CONFIDENTIAL
Guangdong's foreign exchange income last year from all trade was US$1,600 million. Of this, some US$420 million was retained by the provincial authorities and the remainder remitted to Peking. Almost all of these foreign exchange earnings must have come from or through Hong Kong.
7.
Statistics of trade between Hong Kong and the whole of China in the first 11 months of 1980 were as follows:
(a) Direct imports from China:
US$3,926 million up 48%
(b) China's re-exports through Hong Kong:
US$1,509 million up 50%
(c)
Direct exports to China:
(d) Re-exports to China:
Balance of Benefit.
8..
US$ 275 million up 217%
793 million
US$ up 280%
The overall balance of trade is clearly still very strongly in China's favour. However, the rate of increase in Hong Kong's trade deficit is now showing a decline. This illustrates the shift from Hong Kong being simply a market for traditional Chinese supplies of food, water and consumer goods to recognition of its valuable role as an entrepot.
Speed of Future Development in Guangdong
9.
Despite the call made by the new Governor of Guangdong, Ren Zhongyi, to develop the whole of the provinces of Guangdong and Fujian as Special Economic Zones, future development is unlikely to be rapid. Progress in most areas of the present SEZs is little beyond the land clearance and preliminary construction stages. An adequate infrastructure has also to be built virtually from scratch. Whilst foreign investment is by no means restricted to the SEZS (Hong Kong businessmen are involved in enterprises throughout Guangdong), the province has attracted few large-scale or capital intensive joint enterprises (with the notable exception of construction projects for hotels and tourist resorts). Investment is likely to continue to be directed towards relatively small-scale, light industrial and part processing enterprises. In certain land or labour intensive industries there will be an incentive for local industries to move north, taking
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CONFIDENTIAL
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