TNAG-1268-FCO40-1617-China-s-economic-relationship-with-Hong-Kong-Shenzhen-econom-1983 — Page 56

CONFIDENTIAL MI

25

26.

Another approach which illustrates the

importance of Hong Kong as a source of foreign

exchange is to compare China's net foreign exchange earnings from Hong Kong with its foreign exchange and

gold reserves (Table 11).

Tble 11: China's foreign exchange and gold reserves

Foreign exchange

reserves

(US$Mn)

Gold

reserves

US$ value of gold reserves (*)

(million

(US$ Mn)

troy ounces)

Foreign exchange and gold reserves

(US$Mn equivalent)

Net foreign

exchange earnings from Hong Kong (US$ Mn)

1 79 1980

2154

(12.80)

6707

8861

3829

2262

(12.80)

7526

9788

4764

1981

4773

(12.67)

5068

9841

5077

82

11125

(12.67)

5752

16877

5320

te: (*) Value at London year-end closing gold price.

Without the foreign exchange earnings obtained from Hong Kong, China's foreign exchange and gold reserves would have been depleted within about two to three years. In practice, what this would probably have meant is that China would have had to pursue a less expansionary economic policy, or at least one less dependent on imported technology.

G.F. 326

CONFIDENTIAL #3