TNAG-1173-FCO40-1465-Future-of-Hong-Kong-special-study-by-FCO-for-the-Prime-Minis-1982 — Page 97

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which they derive from Hong Kong, and of the need to preserve

it as a capitalist entity if its prosperity, and hence its

usefulness to China, are to be maintained. The problem for them

is how to reconcile their political objective of recovering

sovereignty and the economic reasons for keeping Hong Kong prosperous.

5.

No solution will in any case be possible without Chinese

cooperation. The territory is indefensible against military

or economic pressure from the PRC. Given current expectations,

an unhelpful statement from Peking, or lack of visible progress

in discussions with the Chinese on the future, would damage con-

Moreover, the PRC are entitled under international

fidence severely.

law to the return of the New Territories in 1997.

British Interests

6.

Contrary to the apparent belief of the Chinese Government,

the UK receives no direct governmental revenues from Hong Kong.

The visible trade balance favours Hong Kong; invisibles give

the advantage in the current account to the UK. Because of

Hong Kong's lack of exchange and other controls it is not possible

to make precise calculations of flows of capital, dividends etc.

The best estimate is that the overall economic balance between

the UK and the Territory is about even. Hong Kong is, however,

important to the UK: -

(a) as a commercial and financial centre for the UK, and

(b)

the West, in the Far East;

as a market for British exports, particularly of capital

goods;

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/(c)