TNAG-1457-FCO40-1981-Relations-between-Hong-Kong-and-China-1986 — Page 217

NTIAL

Foreign and Commonwealth Office

London SW1A 2AH

A A McLean Esq

Economic Services Branch

Government Secretariat Lower Albert Road

HONG KONG

Telephone 01-

Your reference

Our reference

ho Thomas

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HKSIC 220/2 нки

RECEIVED IV REGISTRY

0 7 JAN 1986

Date

3 January 1986

Dear Mclean,

CLS

INDEX

Y

PA

ution Taken

HONG KONG/CHINA ECONOMIC RELATIONS

1.

Thank you for your letter of 14 December 1985 enclosing material on the basis of Chinese statistics, particularly the balance of payments. I would like to express my appreciation also for the three papers prepared by your Division which were sent to us under cover of Richard Margolis' letter of 5 November. -2/10 Developments in the Territory are probably the best indication of ) the direction Chinese import policy is moving; your detailed analysis is of great interest.

2. I have no particular comments on the earlier papers, and will restrict myself to your more recent note on Chinese statistics and your comments on letters by Rod Wye and myself on the recently published balance of payments statistics.

CHINESE NATIONAL INCOME, TRADE AND BALANCE OF PAYMENTS FIGURES

3. It may be worth noting (para 6 of your paper) that the Seventh Five Year Plan does have targets expressed in GNP form and that the Chinese presumably with IMF assistance - are starting to collect statistics on the SNA basis. (The difficulties noted in para 7 are likely to make such statistics less than usually reliable however.)

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4. The 1985 World Bank Atlas presents figures for GNP per head which are adjusted in an attempt to minimise the effects of exchange rate fluctuations, and uses alternative conversion factors where market exchange rates are held to be inappropriate. Their figures do not however much alter the relative position shown in your para 8: provisional 1983 numbers are US$290 for China and US$6,000 for Hong Kong. It is of course likely that on a true purchasing power parity basis the Chinese relative standard of living would be somewhat higher, given low costs for many items of the typical household budget.

5.

I would agree with the discussion of paras 10-16 that the Customs data give a more accurate picture of trade than the rather vague, contract-signing MOFERT numbers. The figures presented by

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