TNAG-1370-FCO40-1816-Relations-between-Hong-Kong-and-China-1985 — Page 20

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33.

Apart from consumer goods, semi-manufactures like textiles and electrical parts also make up a sustantial proportion of Hong Kong's domestic exports to China. Besides satisfying China's industrial demand, a substantial proportion of these semi-manufactures arises from compensation trade and processing arrangements between Hong Kong and China (especially the special economic zones). A crucial factor determining how easily these items can be imported into China is whether the finished products made from these semi-manufactures are for export or for local consumption, as export-generating imports are ensured an import permit under the current political-economic climate of China.

34.

A very rough estimate, derived from analysing

the product composition of Hong Kong's domestic exports to

China, suggests that at least half of them could be

significantly affected by the restrictions on imports

recently imposed by China.

35.

As regards Hong Kong's re-exports to China, items like road vehicles, office machines, and telecommunications and sound recording and reproducing

apparatus are expected to be adversely affected by the

very high duties and taxes. The tariff rate on motor vehicles is 150%, with an additional regulatory tax of 50% on top of the tariff. But other items like machinery, and iron and steel are likely to be less seriously affected. For textile yarn and fabrics, again the crucial factor is whether the finished products, i.e. garments, are for exports or local consumption. A very rough estimate, derived from analysing the product composition of Hong

Kong's re-exports to China, suggests that at least

one-third of them could be significantly affected by the

restrictions.

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