TNAG-1457-FCO40-1981-Relations-between-Hong-Kong-and-China-1986 — Page 98

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political relations with the non-Communist world in the

early 1970's, China gradually liberalised its policy

stance towards foreign credit and began to accept a

relatively small amount of short- to medium-term trade

credit to finance the importation of grains and industrial

plant. It was, however, only after the downfall of the

"Gang of Four" and the subsequent rehabilitation of

Premier Deng Xiaoping that China eventually took a more pragmatic view towards foreign finance and recognised the need for foreign loans to speed up its programme of modernizations. Hence, from the end of 1978 onwards,

China has accepted a series of loans from foreign private banks and governments.

4.

With this fundamental change in China's international financial policy, the role of Hong Kong as a financial centre for China's modernizations grew in

importance. The purpose of this paper is to appraise the strength of the financial relationship between Hong Kong and China, with special emphasis on the significance of

Hong Kong in providing credit facilities and financial services to support China's modernizations programme.

3,

Financial transactions between Hong Kong and China

5.

The financial relationship between Hong Kong and China has become increasingly close in recent years. One indicator is the rapid growth in financial transactions

between Hong Kong's financial institutions and their

counterparts in China. Quarterly statistics on external liabilities to banks and claims against banks and non-banks in China by licensed banks (Table 1) and deposit-taking companies (Table 2) in Hong Kong (as

G F. 12

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