TNAG-1457-FCO40-1981-Relations-between-Hong-Kong-and-China-1986 — Page 114

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Hong Kong: a stepping stone to the China market

32.

During this period, some multinational banks,

which could not gain entrance into China, have set up

representative offices in Hong Kong to maintain a

strategic location for regional business and expansion

into China. For instance, Japanese banks have become an increasing force in Hong Kong's banking system in terms of

the number of branches and subsidiaries and their total

offshore assets booked in Hong Kong. The number of

Japanese banks operating in Hong Kong has recently increased to 20 (Table 5), the same number as American

banks. The number of representative offices of foreign

banks in Hong Kong has also risen rapidly over the past

years. At the end of December 1985, there were 131 such representative offices in Hong Kong, representing an increase of 17% over 1984 and 66% over 1977 (Table 12).

Many of these are using Hong Kong as a stepping stone to

the China market.

A

Hong Kong as a source of funds

33.

Information about Hong Kong financial institutions' activities in China is very scattered. However, there is some evidence that Hong Kong may be China's most significant single source of investment

capital. The following assessment attempts to give some indication of the magnitudes involved.

34.

According to China's Ministry of Foreign Economic Relations and Trade, in the seven years since

1979 China has secured loans from governments,

international financial bodies and other sources totalling

G.F. 326

CONFIDENTIAL ##