TNAG-1268-FCO40-1617-China-s-economic-relationship-with-Hong-Kong-Shenzhen-econom-1983 — Page 66

-

35

-

policy change to be reflected in financial

transactions as, presumably, prior contractual and financial commitments could not be rescinded

overnight. Secondly, the fall in credits may have been related to the high interest rates which have

prevailed since 1980.

41.

In 1982, the trend of a sharp fall in Hong

Kong's net claims against China intensified further

to the extent that the net position was actually reversed. Throughout 1982, China maintained net

claims against Hong Kong and the value of these net claims increased from US$122 million at end March

1982 to US$838 million at end December 1982. This

phenomenon was rather puzzling and it appeared that it was more because of increase in China's claims on

Hong Kong's financial institutions than the decrease in Hong Kong's financial institutions' claims on

China. No satisfactory explanation for this is available at present.

42.

However, it is dangerous to conclude on the basis of this recent phenomenon that Hong Kong has ceased to be an important source of credit to China. This situation may only be temporary partly as a consequence of re-adjustments in China and of high

interest rates. Looking into the future, Hong Kong could well be an important source though probably not the main source of finance for projects like oil exploration in South China Sea.

-

G.F. 326

CONFIDENTIAL # #✯