CONFIDENTIAL #3
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(d)
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not materially altered in Hong Kong, they are not merely transhipped through Hong Kong. It is likely that China's success in expanding this trade is related to its ability to tap Hong Kong's skills in trading and marketing and to use good air and sea links with the rest of the world so that a degree of dependence still exists.
Chinese exports of services to Hong Kong, many of which, such as down-market tourist services, could not easily be sold elsewhere. A considerable degree of dependence probably exists.
On balance the data suggests that China's dependence on Hong Kong as a market for its goods has not diminished, except to the extent that re-exports have become more important. In some senses, China's dependence on Hong Kong has probably increased as it has made greater use of Hong Kong facilities as a result of its increased efforts to earn additional foreign exchange through international trade. At the same time, the emergence of China as the second largest market for Hong Kong's domestic exports has increased Hong Kong's dependence on China.
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CONSIDENZUAL
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