Mr Leeks. HKD
CONFIDENTIAL
Reference....
HICK 020110.
ZOEIVED A
REGISTRY
& NOV 1985
ken
12
HONG KONG/CHINA TRADE
INDE
We spoke about Margolis' letter of 20 September to William Ehrman; you sought comments on this and the attached note by McLean. I apologise for the delay in replying caused by my leave.
1.
2.
Most of the analysis
-
particularly that contained in Annex A -
is straightforward, and I have only a few comments.
Trade and Financial Links
3. Figures 1 and 2 (attached) present the main data of Attachments A and B so as to show the trends more clearly.
4. The rapid growth in imports to the Chinese economy seen since late 1984 has led to the PRC's traditional trade surplus (including re-exports) with the Territory becoming a deficit in the first half of 1985:
TABLE 1
VISIBLE TRADE
[( · ) surplus for PRC, deficit for HK; ( + ) vice versa]
1983 1984
Jan-June 1985
US$ million
-3,357 -2,089
+ 884
5.
This has made a substantial contribution to the turn around in Hong Kong's overall visible trade position from a deficit of US$1.3 billion in the 12 months ending July 1984 to a surplus of US$0.7 billion in the subsequent 12 month period. Both re-exports, and domestic exports from Hong Kong to China have benefited from the surge in Chinese imports.
6.
Attachment B of the letter presents data on foreign exchange flows arising from trade and other transactions. There is a figure (series (c)) for China's net foreign exchange earnings from Hong Kong which is expressed as a proportion of total, gross Chinese foreign exchange earnings.
7.
The fundamental point about the significance of such measures is made in paragraph 5 of the Annex, but does not come through clearly enough in the letter itself (though it is alluded to in paragraph 6). Net measures and particularly changes in them over time obscure the critical distinction between sources of foreign exchange and uses of these funds. The statistics presented indicate
CONFIDENTIAL
CODE 18-77 AWO Ltd. 7/84
No comments yet.
Private notes are available after approval.