TNAG-1370-FCO40-1816-Relations-between-Hong-Kong-and-China-1985 — Page 86

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香港下亞厘畢道

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CONFIDENTIAL

K

DIEL

ник огонь

RECEIVED IN REGISTRY

26 SEP 1985

LastAY

DESK OFFICER

INDEX

PA

Actiun. Taken

W. G. Ehrman E$q.,

Hong Kong Department,

FCO

Dear William,

Hong Kong/China Trade

Copied tow Hallett BU 3.10.85

ск

GOVERNMENT SECRETARIAT

LOWER ALBERT ROAD

HONG KONG

der bation

a dr. Pavell

An imputamis

20 September, 1985

Letter.

Pre examine

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wh

есменичавитель вос

848

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make

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a subminden

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One of the more extraordinary developments in the Hong Kong economy in recent months has been the change-over from a deficit on visible trade to a surplus. There was an adverse balance of HK$10.5 billion in the 12 months ending July 1984: in the succeeding 12 months ending July 1985 there was a favourable balance of HK$5.2 billion.

2.

Traditionally, there has been a chronic deficit in visible trade offset by substantial net capital inflows, and, in recent years, by net invisible earnings from tourism and the rapid expansion of the financial and related services sector.

3.

The recent swing in visible trade is also reflected in the figures for visible trade between Hong Kong and China. I enclose a table for the figures since 1978 which show that in the first half of 1985 Hong Kong had a favourable balance of trade with China of nearly HK$6.9 billion (or US$0.88 bn). This indicates that the adverse trade balance with Hong Kong must be a significant contributory factor to the fall in China's foreign exchange reserves of about US$5 bn in the first half of 1985. This clearly raises questions about the traditionally received truth that Hong Kong produces about 30 per cent of China's foreign exchange earnings. You will recall that we made presentations to the Chinese during the talks, based on this assumption, to underline the value of Hong Kong to China.

4.

и

We have recently recalculated these figures and whilst it is still true that China's gross foreign exchange earnings from Hong Kong are still about 30 per cent of its total foreign

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