TNAG-1235-FCO40-1548-Future-of-Hong-Kong-1983 — Page 35

1

110

China (11-8)

699

13. China's exports via H.K. re-exports

1,687

14. China's imports via H.K. re-exports

933

15. Change in China's trade balance after a take-over

(10-12-13-14)

1,915

HI The Difference

16. The net loss to China from take-over (9-15)

3,684

Source:

Lines 1, 2 and 10, Hong Kong Review of Trade in 1980, Censtis and Statisties Department, Hong Kong, pages 2, 4, 18 and 23.

Lines 4, 5 and 6, Economist Intelligence Unit, Quarterly Economic Review of China, Hong Kong and North Korea, Third Quarter, 1981, page 1.1. Line 7, estimated by author.

Line 11, Hong Kong 1981, Government Printer, Hong Kong, 1981. Appendix 11 and 12, using Breazer method.

Lines 13 and 14, Hong Kong Review of Overseas Trade in 1980, pages 2, 52 and 53.

In addition to these important earnings of foreign exchange, Hong Kong renders other services to China. There has been a great deal of investment made by Hong Kong firms in China since 1978, which involves a transfer of technology. Since this is of a kind familiar to Hong Kong Chinese it is likely to be a good deal more suitable for China than some of the highly capital-intensive technology purchased from developed countries. Hong Kong pro- vides a sort of shop window for China, where technology and equipment can often be seen in operation and examined carefully prior to purchase. Hong Kong also acts as a social laboratory for China, where China-owned banks and finance companies can ex- periment outside China with market mechanisms and learn about international financial practices. In recent years the laboratory function has increased, with China sending managers down to Hong Kong to learn modern business methods, gain experience of a non-planned economy and improve their general performance,

China suffers from a chronic shortage of power and cncigy and factories often slow production as a result. Since April 1979 Hong Kong has sold electricity to China and has been linked into the Guangdong grid, a small but useful gain for China. A final benefit for China, although most of the gains lie in the future, is the inter- mingling of the two economies since 1978. Hong Kong hegan seriously to develop the New Territories in 1972 and a rapid expan sion of industry and commerce has emerged as Hong Kong pushes towards the China border. In turn, China established the special

:

: