TNAG-1235-FCO40-1548-Future-of-Hong-Kong-1983 — Page 36

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economic zone of Shenzhen in about 19785 and has begun to relax the border regulations, so that Hong Kong taxis now cross into China and Hong Kong currency circulates in Shenzhen, although the authorities try to restrict this. In future, China may well have a strong, well-developed industrial base in Shenzhen with benefits of Hong Kong skills, technology and entrepreneurship. If the area in China and the adjacent area of the New Territories develop together, then ultimately China will inherit everything. It is pre- sumably for this reason that China encourages the development of the New Territories, is believed to invest there through its com- panies in Hong Kong, and is thought to have assured the Hong Kong authorities that it would not take exception to Hong Kong pushing towards the China border.

HONG KONG'S GAINS FROM CHINA

Naturally, benefits flow in both directions and the relationship is to some extent symbiotic. Hong Kong gained a regular supply of labor as people came across the border, either legally or illegally. From the start of 1977 to October 1980, some 392,000 illegal immi- grants are estimated to have reached Hong Kong and there were an additional 55,000 legal immigrants per annum who stayed in Hong Kong. This flow has worked in the past to keep wage levels relatively low and rendered Hong Kong very competitive inter- nationally. Since the immigrants are usually young adults this pro- vided a ready-to-go work force without the expense of rearing and educating them. More recently this is seen as less desirable, and the growing numbers in Hong Kong put pressure on social serv- ices, housing, space, water supply and the like, and attitudes have changed and hardened so that illegal immigrants are now returned and it is much harder both to reach Hong Kong and to stay there. This is preventing the labor supply from increasing as in the past and as a consequence wage rates are rising quickly. In turn this forces Hong Kong to move out of labor-intensive industries and move up-market into more sophisticated and capital-intensive in- dustries, production methods and goods.

China has also been a source of reasonably reliable and cheap food for Hong Kong, helping to raise the standard of living and possibly preventing some social or political unrest. China also sells water to Hong Kong, an essential and scarce commodity, despite successful promotion of local reservoirs, including High Island Re- servoir which is a fresh water reservoir carved out from the sea in