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BEEN ESTABLISHED BETWEEN BOTH SIDES, WILL PROVIDE A FIRM FOUNDATION FOR ACHIEVING A SMOOTH TRANSFER IN 1997.

BASIC LAW

12.

OVER THE PAST YEAR, THE BASIC LAW DRAFTING COMMITTEE AND ITS VARIOUS SUB-GROUPS HAVE MADE SUBSTANTIAL PROGRESS IN DRAFTING THE

BASIC LAW WHICH WILL PUT INTO EFFECT CHINESE POLICIES TOWARDS THE

SPECIAL ADMINISTRATIVE REGION AS SET OUT IN THE JOINT DECLARATION

AND ITS ANNEXES. NATURALLY THE PEOPLE OF HONG KONG HAVE BEEN

/ WATCHING WITH GREAT INTEREST THE DRAFTING PROCESS OF THE DOCUMENT

WHICH WILL FORM THE FRAMEWORK FOR THE SPECIAL ADMINISTRATIVE REGION

IN TEN YEARS' TIME AND WHICH WILL ALSO INFLUENCE THE EVOLUTION OF

OUR OWN SYSTEMS BEFORE THEN. MANY HONG KONG PEOPLE HAVE BEEN

DIRECTLY INVOLVED IN THE PROCESS. THE FIRST DRAFT OF THE BASIC LAW

DUE TO BE PUBLISHED EARLY NEXT YEAR, WILL BE ANOTHER KEY BUILDING

BLOCK IN THE CREATION OF A CLEAR STRUCTURE FOR THE FUTURE.

ECONOMIC RELATIONSHIP WITH CHINA

13.

EN.

•

HONG KONG'S ECONOMIC LINKS WITH CHINA ARE CONTINUING TO STRENGT-

DURING THE PAST YEAR CHINA HAS REMAINED OUR LARGEST TRADING PARTNER. IN TURN, WE ARE NOW THE BIGGEST SINGLE MARKET FOR CHINESE EXPORTS, QUITE APART FROM THE LARGE AMOUNT OF CHINESE GOODS WHICH ARE TRANSHIPPED TO OTHER MARKETS THROUGH HONG KONG. TOTAL VISIBLE TRADE

BETWEEN CHINA AND HONG KONG IN THE FIRST HALF OF 1987 SHOWED AN

INCREASE OF 52 PERCENT OVER THE FIRST HALF OF 1986. THIS IS REMARK-

ABLE BY ANY STANDARDS. HONG KONG IS ALSO RESPONSIBLE FOR A VERY

HIGH PROPORTION OF EXTERNAL INVESTMENT IN CHINA. BETWEEN 1979 AND 1985, SOME TWO THIRDS OF ALL PLEDGED EXTERNAL INVESTMENT IN CHINA

CAME FROM HONG KONG. CHINESE INVESTMENT IN HONG KONG HAS ALSO

CONTINUED TO GROW, AND FINANCIAL LINKS BETWEEN US HAVE CONTINUED TO STRENGTHEN, BOTH IN TERMS OF THE NUMBER AND SCALE OF FINANCIAL

TRANSACTIONS AND OF THE RANGE OF SERVICES BEING PROVIDED.

14. AN IMPORTANT DEVELOPMENT IS THE INCREASING AMOUNT OF MANUFACT-

URING PROCESSING BEING SUB-CONTRACTED BY HONG KONG BUSINISSES IN CHINA, PARTICULARLY IN THE PEARL RIVER DELTA REGION. IT HAS BEEN ESTIMATED THAT UPTO ONE MILLION CHINESE WORKERS ARE EMPLOYED IN THIS

WAY TO THE MUTUAL BENEFIT OF BOTH OUR ECONOMIES.

15. TRAVEL BETWEEN HONG KONG AND CHINA ALSO CONTINUES TO GROW. IN 1986, HONG KONG PEOPLE MADE ALMOST 12 MILLION VISITS TO CHINA, AND 280,000 CHINESE VISITORS CAME TO HONG KONG FOR BUSINESS, PLEASURE AND

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