TNAG-1370-FCO40-1816-Relations-between-Hong-Kong-and-China-1985 — Page 88

CONFIDENTIAL

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3.

and

Although the pattern of the trading relationship between China and Hong Kong is changing, it seems unlikely that the present rates of growth in Hong Kong's direct exports to China can be maintained, particularly since last year's exceptional figures appear to be the result of a deliberate decision to mop up excess savings through the import of consumer goods decision which seems unlikely to be repeated this year of a loss of control over the use of foreign exchange reserves, against which corrective action has been taken. But you and copy addressees should at least be aware that our traditional assumptions about the financial value of Hong Kong to China are no longer valid.

9.

I enclose a note on the subject by Allan McLean (Deputy Secretary for Economic Services) to whom I am indebted for considerable help in the preparation of this letter.

c.c. D. G. Blung Esq.,

HM Embassy,

Peking

J. Ashton Esq., FED, FCO

Yours

ever

Rechard.

(R. P. Margolis) Deputy Political Adviser

CONFIDENTIAL