TNAG-1370-FCO40-1816-Relations-between-Hong-Kong-and-China-1985 — Page 32

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Background history

3.

Up to 1977, the formal structure of China's economic presence in Hong Kong remained essentially

unchanged compared with the years immediately after 1949

when the PRC was first established. Trade and other

economic activities of China in Hong Kong were then mainly

handled by various Hong Kong registered companies and agencies which represented specific ministries of the Chinese Government. The three most important examples of these companies and agencies were the China Resources Company (chief representative of the Ministry of Foreign

Economic Relations and Trade), the Bank of China (chief

representative of the Ministry of Finance) and the Hong

Kong Branch of the China Merchants Steam Navigation

Company (chief representative of the Ministry of

Communications).

Though business activities were carried

out in a rather conservative and covert manner, these

China-interest companies enjoyed steady growth

capitalizing on their monopolistic positions.

4.

However, since 1977, when the Four

Modernization Programme was first launched, mainly as a consequence of China's adoption of a more liberal (by past

standards) policy attitude towards foreign economic and

trade relations, trade and other economic links between

Hong Kong and China have assumed new vigour and become

increasingly more intimate generally. As a consequence,

Hong Kong has recovered its historical status of serving

as an important entrepot for China's foreign trade.

Against this background, China-interest companies in Hong Kong have also undergone some changes. Besides stepping

up activities in those areas where they traditionally have

vested interests, these China-interest companies have also moved into areas like property investments which they had,

CONFIDENTIAL # 3