TNAG-1268-FCO40-1617-China-s-economic-relationship-with-Hong-Kong-Shenzhen-econom-1983 — Page 42

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million (US$400 million). Dr Jao's estimates further suggest that in 1980, China's financial institutions in Hong Kong generated a profit of HK$1,143 million (US$230 million) and the non-financial establishments generated a profit of HK$2,961 million (US$595

million).

14.

Given that the net worth and profit estimates of financial institutions are derived from their financial statements, they should be fairly reliable though quite a number of heroic assumptions have to be employed in making the necessary adjustments. However, profits of non-financial establishments (HK$2,961 million or US$595 million) in 1980 appear to be disproportionately large relative to the size of their net worth (HK$1,990 million or US$400 million); implying that the rate of return to net worth in one year was as high as 149%. The corresponding rate of return to net worth for financial institutions was much lower at only 15%.

15.

Even with reference to total assets which may be a more appropriate measure for profitability than net worth, the amount of profit thought to be generated by these non-financial establishments looks too large. With reference to an estimated total asset value of HK$33,762 million (US$6,785 million) in 1980, return to total assets amounted to 9%. This contrasted sharpy with the very much lower rate of return (1.2%) to total assets (estimated to be HK$96,006 million or US$19,294 million) in the case

of financial institutions.

G.F. 326

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