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coast and possesses a container terminal that ranks among the top three in the world. It would have value strategically for warships and commercially for merchant trade. As China lacks long-distance surface warships and relies upon small patrol boats and defensive craft, it has not so far needed such a harbor, and while merchant trade could come through Hong Kong, it does so already and an independent Hong Kong would seem to offer all that China needs.
ECONOMIC RELATIONSHIP
It is the economic relationship that is the strongest and matters most to China. There is a great deal to be gained from the con- tinued existence of Hong Kong, including large-scale foreign ex- change earnings, the acquisition of investment, technology, power and energy, and the use as a social laboratory in which skills can be gained and experiments made. Starting with foreign exchange, how can we determine the benefit of Hong Kong to China? The customary method has been to look at the visible trade surplus for China and in most cases to add in estimates of invisible earnings ---neither China nor Hong Kong provides balance of payments figures so that estimates must be used. There are several items that supply invisible foreign exchange earnings for China. There are thirteen China-owned banks with around 170 branches in Hong Kong and many firms in transport, shipping, retail emporia, news- papers, property and construction. China also receives a share of the profits from joint ventures both in China and Hong Kong. Hong Kong is a source of remittances from residents to relatives in China and provides an important channel for such funds from Overseas Chinese in countries that make it difficult for Chinese residents to remit money safely to China. Finally, many Hong Kong residents visit their families in China, taking money and gifts as well as spending some money there, and in addition some foreign tourists in Hong Kong visit China on one of the easily arranged tours now available. The visible and invisible trade items together are estimated to have supplied China with U.S.$5,599,000,000 in 1980 alone (see Table 1, line 9).
It is suggested, however, that this method is overly simple as an indication of the loss that would be incurred if China took Hong Kong. What is needed is a comparison of what is with what would be, or the "before" and "after" case. The figure of U.S.$5,599,000,000 represents the "before" case only and the method used heretofore is not adequate. After a take-over the trade
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