TNAG-1621-FCO40-2235-Relations-between-Hong-Kong-and-China-1987 — Page 84

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45.

(i) An overall view of the present situation

A large part of the present intimate and wide-ranging economic relationship between Hong Kong and

China has developed over a period of only about seven

years. In the course of accommodating such rapidly

increasing economic links, the economy of Hong Kong has

demonstrated great flexibility and efficiency. The nature of Hong Kong's growing economic relations with China is

not adequately summarized by such phrases as "metropolitan-fringe relationship" or "port-hinterland relationship"; there are further elements involved.

46.

Hong Kong is a city of considerable importance

to the Chinese economy, particularly the economy of south

China. In some particular respects, like external trade,

foreign exchange earnings and the provision of foreign currency loans, Hong Kong is more important than Shanghai. While China is Hong Kong's largest trading partner, Hong Kong is China's second largest trading partner, after Japan. The Hong Kong Branch of the Bank of China (itself a state bank specializing in foreign

exchange transactions) is the largest of all its branches,

either in China or abroad. Up to 80% of all foreign

investment in China has come from Hong Kong. There are

other intangible aspects to the relationship, particularly as regards Hong Kong's position as a centre for business

contacts, for tourism and travel, and as a source of

financial and other business services.

47.

At the same time, PRC-controlled corporations

connected with various levels of the Chinese government

have invested substantially in Hong Kong. In comparison

with the funds allocated to various cities in China, the

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