TNAG-1457-FCO40-1981-Relations-between-Hong-Kong-and-China-1986 — Page 218

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the IMF in the monthly IFS for 1980 onwards are the "Customs Office" data and are described as "more comprehensive". The Fund notes also that the pre-1980 MOFERT numbers "exclude exports of complete plants in the form of foreign aid".

6. I attach some balance of payments tables from the IMF's "Recent Economic Developments" of October 1985. These are:

Adjustments to B of P basis visible trade figures to give data including re-exports

A

Balance of Payments 1981-84

B

C

D

Invisibles 1981-84

Capital Account 1982-84

E SAEC Capital Account data, 1981-84

The balance of payments is discussed further below in response to your comments.

7. I suspect that Hong Kong's statistical system will give rise to problems additional to those mentioned in paras 20-21. If the Chinese move to an adequate GNP reporting system, an "overall" combination of the Hong Kong and Chinese statistics would be problematic because of:

i

ii

the Territory's use of GDP measures with no,use of the "residence" criterion used to derive GNP figures from income receipts, for example; and

the related gap in Hong Kong's external statistics relating to net income from abroad which prevents the creation of a complete current account, and sketchy capital account information.

COMMENTS ON CHINESE B of P STATISTICS

8.

The explanation in your para 1 is probably correct; but the MOFERT figure is too low. The FOB to CIF adjustment for 1984 used by the IMF is about US$1.5 bn - this compares with a visible trade gap (imports CIF) shown on Customs statistics of US$1.4 bn. (I would draw your attention to the removal of re-exports but not earnings derived from them - to derive B of P figures: see attachment B on this.)

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9. The private transfers numbers do show a decline between 1982 and 1984, but this is an area of very poor reporting by the Chinese. Despite rapid increases in visits by overseas Chinese over this period and as the IMF Staff put it, "... increasingly extensive use of banking channels in making transfers to Chinese residents ... such transfers are not captured by the balance of payments reporting system". This suggests that the "private transfers" element is not at all reliable and that net invisibles may be under-reported.

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