TNAG-1621-FCO40-2235-Relations-between-Hong-Kong-and-China-1987 — Page 80

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with Tsuen Wan, Kwai Chung and Kowloon will be of the

greatest relevance in this respect.

37.

(g) Banking and financial services

(i) China as a lender and borrower

The financial relationship between Hong Kong and

China has grown rapidly in recent years, as reflected by

the rapid increase in financial transactions between Hong

Kong's financial institutions (banks and deposit-taking

companies) and banks and other enterprises in China (Table

3). Between end December 1979 and end June 1986, the

external liabilities of Hong Kong's financial institutions

to China grew by 70 times from US$42.9 million to US$3 billion. During the same period, the external claims of

Hong Kong's financial institutions on China grew by four

times from US$1.2 billion to US$4.9 billion. However, the

shares of these external liabilities and claims in the

total claims and liabilities of Hong Kong's financial

sector are still relatively insignificant. By the end of

June 1986, the external liabilities of Hong Kong's

financial institutions to China amounted to only 3% of

their corresponding external liabilities to all countries,

and the external claims of Hong Kong's financial

institutions on China amounted to only 4% of their

corresponding external claims on all countries.

38.

In terms of net financial transactions, Hong Kong's financial sector maintained a net creditor position vis-à-vis China prior to 1981, reflecting the role of Hong Kong as a source of credit finance for China. After late

1981 there was a reversal of the trend, and Hong Kong

G.F. 326

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