G.F. 326
CONFIDENTIAL #2
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most liberal and most competitive, with a wide range of trading, financial and other commercial activities being undertaken. Hence it provides a good training ground for Chinese companies and their staff, particularly in the skills needed for solving commercial problems and for successful international trading. Secondly, through investing in real estate and operating hotels, Chinese companies can acquire modern building and hotel management
know-how. Thirdly, investment in Hong Kong's
manufacturing sector helps China's modernisation through
transfer of technology and of manufacturing skills into
China.
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Summary and conclusions
23.
All the evidence suggests that the economy of China grew rapidly in the first half of 1985. Underlying
such rapid growth, however, there were imbalances in a number of important areas. Apart from energy and transportation which have long been problem areas, the massive influx of foreign goods which began in the fourth quarter of 1984 has resulted in a very large visible trade deficit for China and its foreign exchange reserve position has deteriorated sharply. Disturbed by this
recent development, China has adopted a number of remedial measures, most of which were aimed at restricting imports,
with a view to restoring its external balance.
24.
Benefiting from China's consumption and import
boom, Hong Kong's domestic exports and re-exports to China continued to grow rapidly in the first half of this year. The growth rate is, however, expected to slow down in the
second half as a result of the import restrictions
recently introduced by China. Nevertheless, for 1985 as a
whole, the growth rate is still expected to be substantial.
CONFIDENTIAL # Z
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