TNAG-1370-FCO40-1816-Relations-between-Hong-Kong-and-China-1985 — Page 23

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18

A

36.

Since March 1985 when China abruptly reduced foreign exchange payments, some consumer products like

radio-receivers, casette tape recorders, colour TV and office machines which were produced in Hong Kong or

imported by Hong Kong traders for shipment to China have

been denied entry into China at very short notice. Many motor vehicles imported by Hong Kong traders for shipment

to China were reportedly also denied entry. This is reported to have caused substantial losses to some local traders and manufacturers. Many of these goods have since

been sold in the local market. For some items like sound

recorders and TVs, price competition has intensified, with

advertisements promoting stockpiled goods frequently appearing in local newspapers.

37.

(c) Implications for the general macroeconomic

situation in Hong Kong

At a time when Hong Kong's domestic export

performance in general is not very satisfactory, a further

slowing down in the growth rates of domestic exports and re-exports to China is undesirable. As well as the

manufacturers and traders directly involved, trade related

financial services and communication services would also

be adversely affected. Sluggish performance of domestic exports and re-exports could be expected to have an

adverse effect on employment generally and manufacturing

employment in particular, though the effect might take some time to work through.

38.

For the first time since 1951, Hong Kong

recorded a visible trade surplus of HK$278 million with

the world in the first half of 1985, and of HK$6.9 billion

with China. The expected slowdown in export growth to

G.F. 326

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