TNAG-1268-FCO40-1617-China-s-economic-relationship-with-Hong-Kong-Shenzhen-econom-1983 — Page 46

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Part III: IMPORTANCE TO CHINA OF FOREIGN EXCHANGE

EARNINGS FROM HONG KONG

18.

(a) Nature of China's economy

The economy of China is self sufficient in many aspects. It is a fairly closed economy with a small external sector relative to its overall size. In 1981, the value of China's visible foreign trade

amounted to only US$43.11 billion. This was 8% less than the value of Hong Kong's trade (US$46.74 billion) in the same year notwithstanding the fact that in terms of national income the economy of China

was more than nine times larger than that of Hong Kong (Tables 6a and 6b). However, the economy of China has become increasingly "open" in the last few years. In 1981, the ratio of visible foreign trade

(exports and imports of goods) to national income reached 19%. Although this was not particularly high

by international standards, it was significantly higher than the corresponding ratios in earlier years

of 15.4% in 1980, 13.6% in 1979 and 11.8% in 1978.

Such a dramatic increase in the relative importance

of the merchandise trade sector is related to the

Four Modernizations Programme. Foreign technology, capital goods and, to a lesser extent, consumer goods are being channelled in for the modernization programmes and, as foreign exchange is required to finance such purchases, China has been making great efforts to promote exports.

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